In this video, I'll take a look at the head and shoulders pattern, the head and shoulders pattern
is one that is recognized by most traders.
It's very commonly traded.
So, of course, you want to know about it, a head and shoulders and an inverse head and shoulders,
because there's two directions that you can trade in.
Look, something like this in the case of a head and shoulders and an uptrend.
So what happens is you get a continuation of the uptrend, you get the pullback like you get, you know,
in any uptrend, and then you continue to go higher, you make a higher high.
That's part of an uptrend as well.
You pull back a bit and then this hump over here doesn't make a new high.
So this is a shoulder.
That's a shoulder.
And that's your head.
Hence the name.
You can draw the line from these little dips between the head and shoulders, between each shoulder
and head, I should probably phrase it out and that's your next line.
And your neck line is a signal to either buy or sell in this case.
So in a head and shoulders.
So think about it.
What's happened is we've rallied, we continued.
And then this time we just ran out of momentum.
The great thing about head and shoulders, it's kind of built in measuring stick here, where the top
of the head to the neck line, if you measure that and let's just say it's two hundred dollars, well,
I'll break down.
And the neckline, you're aiming for at least 200 dollars.
A lot of times the stop gets put on the other side of the shoulder, and quite often that automatically
gives you at least a positive risk reward ratio, sometimes two, sometimes three to one automatically.
Now, the thing that you'll notice over time is a lot of times these patterns, especially in currencies,
for whatever reason, they'll fulfill that move, grind for a bit and continue going even further.
So that's the head and shoulders.
The inverse head and shoulders, as I'm sure you have guessed, is simply the bullish version of this.
In a downtrend, you'll see something like that.
You've got your neck line, you've got the measurement, you got your target.
Should be noted.
It can be angled like this.
It does not have to be straight up and down 90 degrees, you know, so sometimes, you know, they'll
actually look more like this.
You know, and then you draw your line like that.
Same thing with the inverted head and shoulder.
So let's take a look at these in the wild and you can see exactly.
What I'm looking for here.
And there's your neckline so you can see that the pattern does play out right.
So.
Here is your next line and here is the heighth.
The head to neck line, and you'll notice that we clearly hit the target without too many issues and
in fact hit that area a couple of times, not a huge surprise because a lot of times these areas get
visited more than once.
And finally, over here in Tron, this is a four hour chart, you can see that we had been rallying,
we got a nice rally there, a bigger rally, and then kind of ran out of steam.
Let's go ahead and draw our neckline.
You can see that you could have put your stop loss here.
Your measured move was six cents, so from twenty one, you're looking for a move down to 15 and you
did in fact get it wasn't right away, but it did happen.
Never threatened your stop loss.
You will find that head and shoulders patterns are followed by quite a few traders, mainly because
they're obvious.
They catch a lot of people's attention.
Higher timeframes are much more reliable than shorter time frames, as is the case with all technical
analysis patterns.
Let's take a look at Magdy.
And you can see that we had a crossover at an extremely high level right here at the top, and then
by the time we get down here, we were well below the zero.
So that, of course, would have caught the attention of somebody who was a Mac de trader.
The 20.
E-mailing and a four hour chart you can see slip nicely, crashed through it, found resistant and then
broke down.
That would have been a signal for somebody using M.A.
There are.
Quite a few different ways to do this, but you'll notice that the pattern, the great thing about this
pattern is that when you step into it and you get the breakdown, for example, in this case, you knew
exactly what you were looking for to begin with.
You also had a place to get out because patterns do fail.
They're not 100 percent.
But the nice thing about these patterns is so many people pay attention to them that they give you a
little higher percentage probability.
And the next video, I'll take a look at something called a dodgy candlestick and the myriad of.
Different types.