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.
H&S is probably the first pattern a trader hears of. Here is what we will cover.
Content
1. Nature
2. Identification
3. Occurrence
4. Historical performance
5. Finding entries
6. High probability trades
7. stop losses
8. Miscellaneous
9. Conclusion
Nature
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.
Identification.
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 line where these prices overlap is called the neckline. A head and shoulders pattern is easily visible. So, don’t force yourself into finding it. The more times the prices overlap, the stronger is the pattern.
