10. How to Trade the Head and Shoulders Pattern Part 2

http://www.informedtrades.com/
The 4th lesson in a series on charting patterns which looks at how to trade the head and shoulders pattern and the reverse had and shoulders pattern for daytraders in the stock market, futures market, and forex market.

Category:

Education

Tags:

• howto
• daytrade
• investing
• trading
• forexmarket
• stockmarket
• futures
• market
• informedtrades

[fishatuna18]

on what time frame would you locate the head n shoulders pattern, typically,

[InformedTrades]

I believe this chart is a 5 minute time frame, however it could be effective on a 15 min, hourly, or daily time frame.

-Brendan

[balrico88]

This might be a dumb question but how

come you put the stop/loss on the shoulder when you enter after pattern been completed. On shoulder pattern hasnt been completed. Doesnt time line on graph go from left to right?

[InformedTrades]

Hey Balrico, If you are shorting the break of the neckline then you would want to put your stop on the shoulder.

If you have more questions about this pattern I would strongly suggest checking out InformedTrades' website as there are tons of threads that talk about this specific pattern.

-Brendan

[pressedsuit]

Great video's Dave. Quesion, why would you not put your exit closer to the neckline as opposed to the shoulder? Using H&S pattern, you'd think that a momentum trend upwards will occur, so as to limit your losses, you might place the stop loss just below or in between the neckline and the top of the shoulder. Possibly you are giving yourself room for some volatility?

[InformedTrades]

Hi Pressedsuit, Thanks for the compliment I am glad you like them. The way that I outline trading the pattern in the above video is the "textbook" way of trading the pattern however there are many who make tweaks to this including the one you have suggested. Best Regards, Dave

[W3HXI]

Hi Dave:

I am sure I am asking a dumb question but how did you come up with the 610 points? I see on the chart you start with 122.10 minus 116.00; how does this translate into 610. Thanks for the great videos even for dummies like me. Cheers, Wayne

[hsiaoboi]

Hi Dave, this may be a dumb question, but:

When you say to enter after the break in the first downwards sloping head and shoulder figure, do you imply that we are supposed to sell short to the target price of the distance between head and the neckline? And vice versa for the reverse head and shoulders?

[rexton57]

where can i get the info on volume? thanks

[AndrewLamb15]

Hey Dave, Great Videos - My question is, why is the stop loss placed at the support level on the head and shoulders pattern? If it is truly a support level then wouldn't that price be as low as the price would go?

[saweaq1]

very good video thank you

[innamoratissimo]

how you draw the neckline??

[russellsaunders]

Hello Dave.

Have to says thanks for these videos. I am new to trading and have made quite a few gaffs, until I started watching and understanding what you are teaching. Above all I have now got my confidence back.

On this strategy, would you advise placing an 'Order to Open' on the break point, (or just below) or is it better to trade manually.

Thanks

[DayTradersWin]

Interesting video - friend and subscribe for day trading, day trader, day trade videos, technical analysis...