HEAD AND SHOULDERS

4 ene 2022

There is probably no more famous figure than the HEAD AND SHOULDERS.
Head and shoulders - gives a very profitable signal about the market reversal.
Thanks to this figure, you will be able to open a position at the beginning of a new trend.

What does it look like?

The appearance of the Head and shoulders figure consists of five stages:
1. Uptrend;
2. Left shoulder;
3. Head;
4. Right shoulder;
5. Neck line.

First, we need to find an uptrend on which the left shoulder will form.
After that, the price makes the last rise, forming a head, after which the fall begins.
The right shoulder appears on a downward movement, and the neck line can be drawn after the formation of the right shoulder.

How to trade?

The entry point is the breaking of the neck line.
It is at this moment that the signal of the figure is confirmed.
Some traders are in a hurry and open positions at the peak of the right shoulder, which is very dangerous.
Always wait for the confirmation of the figure.
Don't worry if you missed the first entry point, there is always an opportunity to open a position after the neck line retest.

What about setting a stop loss?

Stop loss is usually placed above the right shoulder.
If the price went above the right shoulder, then the figure did not work, and it's time to exit the deal.

Where will the profit target be?

To calculate possible targets, the following method is used.
It is necessary to measure the distance from the neck line to the maximum of the head, the resulting value is imposed below the penetration of the neck line, after the right shoulder, this will be your goal.

Conclusions

The Head and shoulders figure can bring you a lot of profit when trading correctly.
It is worth noting that there is an inverted head and shoulders figure - and this figure signals a reversal and the imminent beginning of a bullish trend.
The rules of trading are the same as when trading Head and shoulders, but only in a different direction.

Trade using not only your shoulders, but also your head!

Traders, if you liked this idea or if you have your own opinion about it, write in the comments. I will be glad 👩