Head & Shoulders Pattern Trading

[wafikjabra]

Hello to everyone,

I have been extremely interested in this particular pattern for a couple of years now. I have read lots of materials (including encyclopaedia of chart patterns and others) but most of them talk about the same basic concept of trading. I have also spent many long hours on screen monitoring the various characteristics of this pattern and till date could not gain the proper confidence to trade head & shoulders. The beauty about this pattern however, it provides you with clear Entry, TP & SL levels and it has also a good success rate. I would like very much to further develop my trading skills in this field but I don't seem to be on the right path as yet.

I would highly & greatly appreciate the kind help of any expert in this field as in regard to the followings:-

1) Direction to obtain in-depth study to master this pattern.

2) Direction to other possible trading strategies, techniques or indicators (apart from volume) that can be used as an additional parallel confirmation to this particular pattern or perhaps to reduce the failure cases of head & shoulders pattern.

 

[Nigel-P]

Hello to everyone,

I have been extremely interested in this particular pattern for a couple of years now. I have read lots of materials (including encyclopaedia of chart patterns and others) but most of them talk about the same basic concept of trading. I have also spent many long hours on screen monitoring the various characteristics of this pattern and till date could not gain the proper confidence to trade head & shoulders. The beauty about this pattern however, it provides you with clear Entry, TP & SL levels and it has also a good success rate. I would like very much to further develop my trading skills in this field but I don't seem to be on the right path as yet.

I would highly & greatly appreciate the kind help of any expert in this field as in regard to the followings:-

1) Direction to obtain in-depth study to master this pattern.

2) Direction to other possible trading strategies, techniques or indicators (apart from volume) that can be used as an additional parallel confirmation to this particular pattern or perhaps to reduce the failure cases of head & shoulders pattern.

Hi wafikjabra

I've attached a paper that examines whether the head and shoulders pattern has predictive ability. It's been sitting on my desktop and I've have been trying to get around to reading it for weeks but just haven't found the time yet. Looks interesting though, hopefully it is of some use to you.

Personally, although I'm not an expert, I would imagine that a head and shoulders is like most chart patterns, sometimes they work out, sometimes they don't. The key is simply to ensure that you make more when they do work out than you lose when they don't.

Good luck with your study :smart:

Nigel

 

[wafikjabra]

Hi wafikjabra

I've attached a paper that examines whether the head and shoulders pattern has predictive ability. It's been sitting on my desktop and I've have been trying to get around to reading it for weeks but just haven't found the time yet. Looks interesting though, hopefully it is of some use to you.

Personally, although I'm not an expert, I would imagine that a head and shoulders is like most chart patterns, sometimes they work out, sometimes they don't. The key is simply to ensure that you make more when they do work out than you lose when they don't.

Good luck with your study :smart:

Nigel

Hi Nigel,

Thank you sooooo much for your kind attachment of this document.

 

[Nigel-P]

Hi Nigel,

Thank you sooooo much for your kind attachment of this document.

No worries!

 

[wafikjabra]

here is another completely free video on how I trade the Head & Shoulders chart pattern. It's not what you are used to, but it gives me a great risk:reward ratio every time and it works very well.

Created by Camtasia Studio 5

 

[Nigel-P]

here is another completely free video on how I trade the Head & Shoulders chart pattern. It's not what you are used to, but it gives me a great risk:reward ratio every time and it works very well.

Created by Camtasia Studio 5

I agree with the guy on this video that you should be positioning yourself to anticipate the formation of the right shoulder. If you can get an entry near the top of the right shoulder, if the pattern works out you can use some of your floating profit to add another risk free position on a break of the neckline.

 

[rsh01]

Hi wafiq, I wouldn't get too hung up on one pattern, for example on a different t/f this wld not necessarily be a h&s. Its good to understand the logic behind it, its obv a failure of price to make another higher high (the right shoulder), and if the head is big and wide there is an argument for a build up in orders ahead of the head - resulting in a right shoulder forming. These characteristics are evident in many patterns, so limiting your strategy to one is narrowing your scope - for setups and general reading of PA.

This is discussed a bit on forkers thread, he trades a few setups which have similar characteristics to h&s, but not limited to just that. http://www.trade2win.com/boards/forex-strategies-systems/153280-forking-mad.html

An interesting subset of h&s is the quasimodo - it has a deeper join at neck on the right shoulder - and obv logically it indicates a further rejection of the price at this level by printing a lower low. See No Brainer Trades - Trading Forex and Other Markets Using Globally Identifiable Actions, page "patterns" I think. All of the patterns are derived I believe from supply / demand theory of price and order flow.

As others have suggested though these patterns are not fail safe. I only trade them from higher t/f's (h4 and above), but will drill down to H1 and m5 for confirmation that price looks likely to turn (eg lower lows, support becomes resistance, 123 breakouts etc etc), and when I see this additional PA I will enter.

A set and forget entry imo is not the best way of trading this as don't forget this is looking for trend to reverse, and as we all know this is not high probability.

Each to their own though.

G/l.

 

[rsh01]

I agree with the guy on this video that you should be positioning yourself to anticipate the formation of the right shoulder. If you can get an entry near the top of the right shoulder, if the pattern works out you can use some of your floating profit to add another risk free position on a break of the neckline.

I like the formation of the right shoulder when there are clear price points on which it may use as resistance, I don't see the left shoulder as being too big a psychological level on its own. On that nbt link the spike base and bottom buckets are just 2 areas which can help determine exactly where the price may be rejected.

Wafiq, you cld use fibs and or macd div et al I guess for also looking for confluence using 'indicators', but personally as mentioned I wld look for additional PA.

 

[wafikjabra]

I like the formation of the right shoulder when there are clear price points on which it may use as resistance, I don't see the left shoulder as being too big a psychological level on its own. On that nbt link the spike base and bottom buckets are just 2 areas which can help determine exactly where the price may be rejected.

Wafiq, you cld use fibs and or macd div et al I guess for also looking for confluence using 'indicators', but personally as mentioned I wld look for additional PA.

Hi rsho1,

Thanks for your comments. I certainly find fibs & candle patterns are very essential in H&S pattern. No doubt, choosing a good quality pattern is a priority. Another site to look at. I don't however agree with their technique in entering the trade from the head tip but there are few interesting points.

Chapter 14, Part III. Head and Shoulders pattern.

I am searching for another simple PA technique which can add to entry confirmation. It is really an interesting challenge & I hope to find it.

 

[wafikjabra]

Hi wafiq, I wouldn't get too hung up on one pattern, for example on a different t/f this wld not necessarily be a h&s. Its good to understand the logic behind it, its obv a failure of price to make another higher high (the right shoulder), and if the head is big and wide there is an argument for a build up in orders ahead of the head - resulting in a right shoulder forming. These characteristics are evident in many patterns, so limiting your strategy to one is narrowing your scope - for setups and general reading of PA.

This is discussed a bit on forkers thread, he trades a few setups which have similar characteristics to h&s, but not limited to just that. http://www.trade2win.com/boards/forex-strategies-systems/153280-forking-mad.html

An interesting subset of h&s is the quasimodo - it has a deeper join at neck on the right shoulder - and obv logically it indicates a further rejection of the price at this level by printing a lower low. See No Brainer Trades - Trading Forex and Other Markets Using Globally Identifiable Actions, page "patterns" I think. All of the patterns are derived I believe from supply / demand theory of price and order flow.

As others have suggested though these patterns are not fail safe. I only trade them from higher t/f's (h4 and above), but will drill down to H1 and m5 for confirmation that price looks likely to turn (eg lower lows, support becomes resistance, 123 breakouts etc etc), and when I see this additional PA I will enter.

A set and forget entry imo is not the best way of trading this as don't forget this is looking for trend to reverse, and as we all know this is not high probability.

Each to their own though.

G/l.

Dear rsh01,

Thank you very much. You have certainly enlightened on some important facts, also through your high-lighted sites, which include very interesting information. I just want add that although I am using fibo, 123 breakouts, wcci patterns & candle patterns…I am still not holding strong confidence & still facing some drops.

I want to thank you so much for your kind help & the useful information you provided me with. I would highly appreciate any thing else you could advise me with. Thanks,

 

[rsh01]

Dear rsh01,

Thank you very much. You have certainly enlightened on some important facts, also through your high-lighted sites, which include very interesting information. I just want add that although I am using fibo, 123 breakouts, wcci patterns & candle patterns…I am still not holding strong confidence & still facing some drops.

I want to thank you so much for your kind help & the useful information you provided me with. I would highly appreciate any thing else you could advise me with. Thanks,

Nws, make someone happy on one thread, and someone leave on another!

The nbt site is excellent, all free info and very in depth. He has a few vids on there, he's not the best communicator, but they're def worth the viewing. And some of his charts are intimidating with his trend lines - I have probs with even basic trend lines!

I am luckily (lucky to come across it) in a (free) trading room online with far more experienced and better traders than me, and they trade with tried and tested setups (similar to forker) and a cpl have close to 70% SR (I know a few here will be suspicious of this but they live call their trades - and no I don't copy them), and this has been refined through thousands of hours of experience / screen time / testing. I am not trying to give you unattainable goals (you only need 33% SR with RR 1:2), its just an example of how hard it is to improve the probability, but also it shows that it can be done and that PA is all you need, and it looks like you're on the right track.

And that's one reason why i am happy to provide info, as I am the recipient of it (they kindly give me free 1 to 1 screentime!), and its only just that I give some back. I wld do the same even if not in this room as its such a bloody long and difficult journey, which I stress still has to be travelled and mostly alone, that if some guidance can quicken (its not a short cut btw!) that journey then great.

There's a lot of ppl on here willing to do the same also, though it may not be immediately apparent.

(For the record in case anyone misinterprets this post as me plugging smthg the room I am a member of consists of all full time traders trading similar strategies and mkts, none are vendors of any type, its a free room, I do not control entry).

 

[wafikjabra]

Nws, make someone happy on one thread, and someone leave on another!

The nbt site is excellent, all free info and very in depth. He has a few vids on there, he's not the best communicator, but they're def worth the viewing. And some of his charts are intimidating with his trend lines - I have probs with even basic trend lines!

I am luckily (lucky to come across it) in a (free) trading room online with far more experienced and better traders than me, and they trade with tried and tested setups (similar to forker) and a cpl have close to 70% SR (I know a few here will be suspicious of this but they live call their trades - and no I don't copy them), and this has been refined through thousands of hours of experience / screen time / testing. I am not trying to give you unattainable goals (you only need 33% SR with RR 1:2), its just an example of how hard it is to improve the probability, but also it shows that it can be done and that PA is all you need, and it looks like you're on the right track.

And that's one reason why i am happy to provide info, as I am the recipient of it (they kindly give me free 1 to 1 screentime!), and its only just that I give some back. I wld do the same even if not in this room as its such a bloody long and difficult journey, which I stress still has to be travelled and mostly alone, that if some guidance can quicken (its not a short cut btw!) that journey then great.

There's a lot of ppl on here willing to do the same also, though it may not be immediately apparent.

(For the record in case anyone misinterprets this post as me plugging smthg the room I am a member of consists of all full time traders trading similar strategies and mkts, none are vendors of any type, its a free room, I do not control entry).

Hi rsh01,

I have spentmost of today going through lots of pages & videos from the NBT site. It was really useful& as you said, very in depth.

I love the forex market & I try to read & learn on PA as much as possible... and I certainly gain a lot from experienced & helpful traders like yourself. Thank you rsh01 for your kind help and I really appreciate & enjoy all your comments & remarks.