WEBVTT 00:02.560 --> 00:07.300 In this video, I'll take a look at the head and shoulders pattern, the head and shoulders pattern 00:07.300 --> 00:10.200 is one that is recognized by most traders. 00:10.210 --> 00:12.160 It's very commonly traded. 00:12.170 --> 00:18.700 So, of course, you want to know about it, a head and shoulders and an inverse head and shoulders, 00:18.760 --> 00:21.160 because there's two directions that you can trade in. 00:22.480 --> 00:27.370 Look, something like this in the case of a head and shoulders and an uptrend. 00:28.430 --> 00:34.220 So what happens is you get a continuation of the uptrend, you get the pullback like you get, you know, 00:34.310 --> 00:38.030 in any uptrend, and then you continue to go higher, you make a higher high. 00:38.040 --> 00:39.710 That's part of an uptrend as well. 00:40.340 --> 00:45.900 You pull back a bit and then this hump over here doesn't make a new high. 00:45.920 --> 00:47.210 So this is a shoulder. 00:47.270 --> 00:48.200 That's a shoulder. 00:48.200 --> 00:49.160 And that's your head. 00:49.500 --> 00:50.450 Hence the name. 00:51.710 --> 00:58.010 You can draw the line from these little dips between the head and shoulders, between each shoulder 00:58.010 --> 01:02.300 and head, I should probably phrase it out and that's your next line. 01:02.300 --> 01:07.940 And your neck line is a signal to either buy or sell in this case. 01:07.950 --> 01:09.080 So in a head and shoulders. 01:10.100 --> 01:10.830 So think about it. 01:10.850 --> 01:14.000 What's happened is we've rallied, we continued. 01:14.000 --> 01:16.400 And then this time we just ran out of momentum. 01:17.680 --> 01:22.570 The great thing about head and shoulders, it's kind of built in measuring stick here, where the top 01:22.570 --> 01:29.930 of the head to the neck line, if you measure that and let's just say it's two hundred dollars, well, 01:29.940 --> 01:30.760 I'll break down. 01:30.970 --> 01:34.090 And the neckline, you're aiming for at least 200 dollars. 01:34.460 --> 01:41.050 A lot of times the stop gets put on the other side of the shoulder, and quite often that automatically 01:41.050 --> 01:47.890 gives you at least a positive risk reward ratio, sometimes two, sometimes three to one automatically. 01:48.400 --> 01:53.200 Now, the thing that you'll notice over time is a lot of times these patterns, especially in currencies, 01:53.200 --> 01:58.860 for whatever reason, they'll fulfill that move, grind for a bit and continue going even further. 01:59.620 --> 02:01.840 So that's the head and shoulders. 02:01.840 --> 02:07.360 The inverse head and shoulders, as I'm sure you have guessed, is simply the bullish version of this. 02:07.780 --> 02:10.390 In a downtrend, you'll see something like that. 02:10.390 --> 02:14.140 You've got your neck line, you've got the measurement, you got your target. 02:14.710 --> 02:15.580 Should be noted. 02:15.580 --> 02:16.840 It can be angled like this. 02:16.840 --> 02:21.850 It does not have to be straight up and down 90 degrees, you know, so sometimes, you know, they'll 02:21.850 --> 02:24.580 actually look more like this. 02:26.120 --> 02:27.920 You know, and then you draw your line like that. 02:29.060 --> 02:31.980 Same thing with the inverted head and shoulder. 02:32.000 --> 02:35.150 So let's take a look at these in the wild and you can see exactly. 02:37.070 --> 02:38.480 What I'm looking for here. 02:41.510 --> 02:45.920 And there's your neckline so you can see that the pattern does play out right. 02:46.820 --> 02:47.510 So. 02:48.490 --> 02:53.760 Here is your next line and here is the heighth. 02:56.360 --> 03:05.390 The head to neck line, and you'll notice that we clearly hit the target without too many issues and 03:05.390 --> 03:11.570 in fact hit that area a couple of times, not a huge surprise because a lot of times these areas get 03:11.570 --> 03:13.130 visited more than once. 03:14.890 --> 03:19.410 And finally, over here in Tron, this is a four hour chart, you can see that we had been rallying, 03:19.420 --> 03:23.800 we got a nice rally there, a bigger rally, and then kind of ran out of steam. 03:24.690 --> 03:26.880 Let's go ahead and draw our neckline. 03:29.490 --> 03:32.370 You can see that you could have put your stop loss here. 03:33.390 --> 03:41.850 Your measured move was six cents, so from twenty one, you're looking for a move down to 15 and you 03:41.850 --> 03:46.020 did in fact get it wasn't right away, but it did happen. 03:46.020 --> 03:48.200 Never threatened your stop loss. 03:49.080 --> 03:55.710 You will find that head and shoulders patterns are followed by quite a few traders, mainly because 03:55.710 --> 03:56.580 they're obvious. 03:56.580 --> 03:58.500 They catch a lot of people's attention. 03:59.010 --> 04:06.000 Higher timeframes are much more reliable than shorter time frames, as is the case with all technical 04:06.000 --> 04:07.530 analysis patterns. 04:10.540 --> 04:12.490 Let's take a look at Magdy. 04:15.130 --> 04:20.590 And you can see that we had a crossover at an extremely high level right here at the top, and then 04:20.590 --> 04:23.440 by the time we get down here, we were well below the zero. 04:24.430 --> 04:29.500 So that, of course, would have caught the attention of somebody who was a Mac de trader. 04:35.940 --> 04:36.720 The 20. 04:37.890 --> 04:46.290 E-mailing and a four hour chart you can see slip nicely, crashed through it, found resistant and then 04:46.290 --> 04:47.020 broke down. 04:47.310 --> 04:50.760 That would have been a signal for somebody using M.A. 04:51.800 --> 04:53.000 There are. 04:54.820 --> 04:59.680 Quite a few different ways to do this, but you'll notice that the pattern, the great thing about this 04:59.680 --> 05:04.450 pattern is that when you step into it and you get the breakdown, for example, in this case, you knew 05:04.450 --> 05:06.630 exactly what you were looking for to begin with. 05:06.640 --> 05:09.340 You also had a place to get out because patterns do fail. 05:09.340 --> 05:10.540 They're not 100 percent. 05:11.260 --> 05:16.750 But the nice thing about these patterns is so many people pay attention to them that they give you a 05:16.750 --> 05:20.020 little higher percentage probability. 05:20.980 --> 05:27.040 And the next video, I'll take a look at something called a dodgy candlestick and the myriad of. 05:27.980 --> 05:29.210 Different types.