Hello traders, following up from my previous educational post I received several requests via private message for my take on the Head and Shoulders pattern.
Featured on the chart is an illustration of a complete Head and Shoulders pattern including the rules I personally use to trade it.
This is an easily identifiable pattern which can be traded across various timeframes which means it can be used by day traders, swing traders or even position traders.
Why the Head and Shoulders pattern?
It has an excellent risk:reward
Appears on all timeframes and markets
Easy to remember and find
It has a precise entry, stop loss and take profit
This formation is mainly seen at market tops. It is rarely perfect in appearance and you may need a good eye to spot one (check my head and shoulder trading ideas for an example).
You can draw this pattern by using the TradingView tool found on the chart section named "Head & Shoulders" or by using trendlines.
From personal experience the best performing Head and Shoulders pattern will have a right shoulder that is a 0.618 retracement of the head.
The correct way to trade this pattern is to wait until the entire pattern has formed, then once price closes below the neckline... You can enter your position :)
To round off this post I truly hope this explained how to trade the Head and Shoulders pattern so you can use this for your own trading.
I am available via private message for any questions you may have.
I suggest to read news on what is expected, noting that tomorrow we will see where Brexit goes