Content
1. Nature
2. Identification
3. Occurrence
4. Historical performance
5. Finding entries
6. High probability trades
7. stop losses
8. Miscellaneous
9. Conclusion
Master class on HEAD & SHOULDERS pattern for trading Bitcoin.
A thread.
Comprehensive guide to head and shoulders pattern. Made exhaustive enough for Trading purposes.
t’s a frequently occurring, misunderstood and arguably the most useful pattern.
RT would be appreciated.
Content
1. Nature
2. Identification
3. Occurrence
4. Historical performance
5. Finding entries
6. High probability trades
7. stop losses
8. Miscellaneous
9. Conclusion
The head and shoulders top is a reversal, bearish pattern, signifying a prospective drop in future prices.
The formation of pattern with a breakdown from its neckline(base) starts a probable bearish move.
A prospective H&S pattern should have 3 distinct peaks. The middle peak is the head. This is the highest point of this pattern, sitting in between 2 shorter peaks, i.e. the shoulders. There must be an overlap in prices of these 3 distinct peaks.
The consensus is that the left shoulder should have the highest volume, the head lesser and the right shoulder the least. This isn't a rule but a general observation. It could change often.
A high-volume breakdown might not see a retest immediately.
The pattern generally occurs after a substantial rise in price, i.e. it occurs when a price has significantly risen and is looking for a reversal.
John Murphy was of the opinion that the neckline is likely to be an upward trending.
Here is an example of downward sloping H&S.
H/S is probably the best performing pattern, in both bull and bear markets.
Although the success rate of meeting the target calculated by range of the depth is only a little more than 50%, the rise is good enough to make ample profit.
Here we see a target being met and the price falling further before a throwback.
Throw-back means the return of price to the neckline levels.
The entry should be taken ONLY when the pattern is completed, not in an anticipation of a completion. Example of an anticipated pattern failure.
Wait for the pattern to completely form. Wait for the breach of the neckline.
Enter only if the above 2 events occur.
The head and shoulders pattern could fail at times. Here is an example of a failed pattern.
The failure generally occurs when the volume showcases an anomaly, or the market structure is looking only for a consolidation and not retracement.
1. Waiting for a retest
2. High Volume break-out
3. High momentum Break-out
Discussed below.
It is common for the Breakdown from the Head and shoulders pattern to go back up and test the neckline.
An establishment of resistance at the neckline is a high probability entry for shorting.
In this case, if the Breakdown is accompanied by high momentum or high volume, a safe entry is available.
Here is an example of High-volume break-down without a re-test,that was a safe entry.
If the Break-down is such, along with breaking the neckline, a previous support is also broken, then a short entry can be taken without a re-test after the support is broken.
A common practice is to target the same number of points as is the range of the head.
Many people have different opinion on measuring the range.
I follow a Conservative method to measure from the neckline to the lowest point of the topmost candle.
A method used by Peter Brandt is placing the stop loss above the high of the candle just before the Breakout.
In my opinion this works well, however I'd place it a bit higher considering the volatility of Bitcoin.
Illustration below
Complete Market structure of H&S
Price is in an uptrend.
Price looks for a reversal forming head and shoulders.
Neck line breaks down, followed back a retest of the Neckline. Price declines again at a range equal to the range of the head.....
Followed by a retest of the Neckline and continuation to the upside.
Sometimes the market structure see a H&S inside a H&S. The price movement for this structure is exactly the same.
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🚨Altcoin Trading Indicator🚨
How to use it. A THREAD.
Please Share.
To use it to buy Altcoins and make a high probability entry, the following conditions needs to be fulfilled.
For a long.
1. A green candle Closes above the cross.
2. Heikin Ashi candle turns green.
3. Price should be above 0.236 Fib from the swing high.
How to add the Indicator.
1. Click on the link and Add it to favorites and apply.
https://t.co/Kn90qgDjMi
2. Or Search it in the tab and then apply it.
The indicator itself the most comprehensive Moving Average Indicator which provides 9 MAs and 13 Different times of MAs.
The base of the indicator was by @insiliconot.
To further enhance it, I have added a cross indicator on the cross which works the best historically on Alts.
Condition 1- The cross.
Entry is made when a Cross occurs on the EMA 13/21.
The indicator automatically indicators the Cross with P for a positive cross or N for a negative cross.
This is the first condition for an Entry.
How to use it. A THREAD.
Please Share.
To use it to buy Altcoins and make a high probability entry, the following conditions needs to be fulfilled.
For a long.
1. A green candle Closes above the cross.
2. Heikin Ashi candle turns green.
3. Price should be above 0.236 Fib from the swing high.
How to add the Indicator.
1. Click on the link and Add it to favorites and apply.
https://t.co/Kn90qgDjMi
2. Or Search it in the tab and then apply it.
The indicator itself the most comprehensive Moving Average Indicator which provides 9 MAs and 13 Different times of MAs.
The base of the indicator was by @insiliconot.
To further enhance it, I have added a cross indicator on the cross which works the best historically on Alts.
Condition 1- The cross.
Entry is made when a Cross occurs on the EMA 13/21.
The indicator automatically indicators the Cross with P for a positive cross or N for a negative cross.
This is the first condition for an Entry.
