Head and Shoulders Pattern

4월 26일

Hello Traders!

The Head and Shoulders Pattern indicator utilizes a unique swing-based pattern recognition to pinpoint head and shoulders patterns in real-time with unparalleled precision.



The head and shoulders chart pattern is a technical analysis pattern used to identify potential trend reversals in financial markets. It consists of three swing highs (peaks), with the middle peak being the highest and the two outside swing highs being slightly lower. The middle peak is referred to as the "head" and the two outside peaks are referred to as the "shoulders."

The pattern typically forms after an uptrend and is in most cases a bearish signal. The neckline is a support level that connects the lows of the two shoulders. Once the price breaks below the neckline, the pattern is confirmed, and a new down trend starts. Conversely, an "inverse head and shoulders" pattern forms after a downtrend and is a bullish signal.

Feature List

1. Real-time pattern detection
   
2. Visualization of entry, stop-loss and take-profit levels
   
3. Pattern performance statistics
   
4. Calculation of risk-rewards ratio
   
5. Risk Management
   
6. Breakout alerts
   
7. Customizable pattern size and accuracy
   
8. Customizable look and feel
   

The value of this indicator is to support traders to easily identify the Head and Shoulders pattern in an automated way. The special swing-based pattern recognition and the numerous built-in premium features make this indicator unique. The trader saves a lot of time scanning the markets for head and shoulders patterns, since everything is done automatically for the trader: Finding the pattern, looking and alerting for a breakout, computing the entry, stop loss and take profit levels as well as handling the risk management and computing the optimal order quantity.

How to Trade with the TRN Head and Shoulders Indicator

1. Identify the Pattern
   
   Add the Head and Shoulders Pattern Indicator to your chart and look for the pattern on the asset and timeframe of your choice. The pattern is detected in real-time. If the pattern develops further in the next bars, then the indicator updates the pattern accordingly until a breakout is confirmed or the pattern becomes invalid.
   
   You can also use the built-in alerts to easily get notified when a pattern occurs. In the indicator settings in the "Alerts" section you can choose whether you want to get notified when a pattern is
   
   1. in the making (Pattern active),
   2. confirms an up breakout (B/O Up Confirmed)
   3. confirms a down breakout (B/O Down Confirmed)
   4. (Unconfirmed) in case a pattern breakout occurs, even if the pattern is not yet confirmed
   
   This allows you to stay informed about potential breakout opportunities that are still awaiting confirmation.
   
   
2. Check Pattern Statistics
   
   The pattern statistics make it easy for you to see how successful a pattern is on the asset and timeframe you are watching. You should always check the statistics before entering a trade. The chart displays the statistics in the upper right corner. These statistics are categorized into two sections: "long" for inverse head and shoulders patterns and "short" for head and shoulders patterns.
   
   In the initial columns, labeled as "short" and "long", the identified breakouts are further divided based on whether the risk-reward ratio (R) is below a specified value (< x) or equal to/greater than the specified value (>= x). The following columns represent the count of the events:
   
   
   1. Occ. (Occurrence) categorized according to the values of R from the first column
   2. TP1, TP2, TP3 (Take Profit) - targets 1, 2 and 3
   3. SL (Stop Loss)
   4. T/O (Time Out) - neither stop loss or targets where hit in a certain amount of time
   
   
   
3. Breakout – Entry, Stop Loss and Targets
   
   The indicator automatically displays the entry price line (EP) in grey at the point where the price breaks through the neckline, indicating a breakout. Once a breakout has been confirmed, place a buy order near the EP level for a long position, or a sell order for a short position. Set your stop-loss at the price level of the red stop-loss line (SL) and set your take-profits at the price level of the green take-profit-lines (TP1, TP2, TP3).
   
   
4. Risk Management
   
   The Head and Shoulders Pattern Indicator comes with a built-in risk management feature. Just go to the settings and scroll down to the section "Risk Management". Here you can enter your Account Size and the percentage you want to Risk when you enter a position after a pattern breakout.
   
   In the "Trade Management" section, you have the option to define the minimum accepted risk-reward ratio for confirmed rectangles. This means that breakouts of patterns failing to meet the minimum risk-reward ratio will not be considered as confirmed signals. If a breakout gets confirmed, the indicator automatically calculates the position size (Quantity). You can read the quantity from the gray entry point line (EP), which is located to the right of the risk-reward ratio (R). Note that your risk-reward ratio (R) is calculated based on TP1.
   
   
5. Customization and Settings
   
   The indicator can scan for smaller and larger patterns at the same time. Adjust the Head and Shoulders Sizes in the indicator settings to align them with your preferences. A larger size results in larger patterns. Depending on the asset class, the market or the market phase, different sizes should be used for the Head and Shoulders pattern detection.
   
   To detect more patterns, increase the tolerance level, even though it may result in lower accuracy. However, be mindful that a higher tolerance level may result in more patterns hitting their stop-loss. Look for a tolerance level that leads to favorable statistics and focus on trading patterns with a proven performance history.
   
   Finally, you have the flexibility to customize various visual elements, such as the color of the pattern and whether to display values like price, target, or risk-reward ratio on your chart. You can also choose where these values appear.
   

Computation Details

The real-time detection of the Head and Shoulders Pattern Indicator utilizes a unique swing-based pattern recognition. The difference to other swing-based computations is that the pivot points are identified without a look-ahead value. The result is a faster and better real-time detection. Furthermore, the detection of the ratios between the single swings is based on a dynamic volatility measurement similar to the ATR. The tolerance level unites several internal parameters into one and results in a user-friendly setting.

Risk Disclaimer

The content, tools, scripts, articles, and educational resources offered by TRN Trading are intended solely for informational and educational purposes. Remember, past performance does not ensure future outcomes.

10월 3일

릴리즈 노트

The Settings UI has been improved.

그저께

릴리즈 노트

The following updates have been made:

The Settings UI and UX has been improved.
Default settings has been updated.