Do you want to learn about head and shoulders and inverse head and shoulders patterns? You are reading the best article about it. After reading this post you got broad knowledge, entry, stop loss, target, and many other things about head and shoulders and inverse head and shoulders patterns and never need to read any other article about it.
I am Prabhat Kumar share market expert for 5 years and I am a specialist in technical analysis. I have done approx 1200 trades using head and shoulders and inverse head and shoulders patterns. So, I have a very huge of experience that when this pattern works or when not. Let’s start.
Head And Shoulders Pattern
The head and shoulders patterns strategy are the most profitable at any time only we should remember some important points at the execution of the head and shoulders pattern rules. These rules are very common to all Reversal Patterns that is
- Rule-1: Always remember that at the time of pattern breakout the Volume must be greater than the previous candle.
- Rule-2: Always take the trade at the breaking of the important trend lines.
- Rule-3: Always remember that larger patterns are more powerful than smaller patterns.
- Rule-4: The Top is more volatile than the Bottom
How To Trade Using Head And Shoulder Reversal Pattern
The Head And Shoulders Pattern is always formed in the uptrend and it reverses the trend in a downtrend. If I compare all the reversal patterns the head and shoulders pattern is a more reliable pattern. This is the king of the major reversal patterns.
You know that the uptrend trend reverses into a downtrend when the uptrend line is broken and taken resistance on the uptrend line then the trend is reversed into a downtrend.
There is the point to notice that before breaking of trend line it makes the higher high. Those two higher high the first is the left shoulder and the second is the Head. Another lower high is formed after the breaking of the trend line. This is the complete head and shoulders patterns.
When do I sell/enter in a head and shoulders reversal pattern? Before, did you know about that when you sell? you must know How to draw the Neck Line of head and shoulders patterns? The neckline of the head and shoulders patterns strategy is very easy you pick the two-point first is the bottom of the left shoulder and head and the second is the bottom of the right shoulder and head and draw a straight line with both points that is the neckline of head and shoulders patterns.
Now, answer the question What is when I sell in head and shoulders pattern? There are two-point to sell first is when the trend neck is broken with the volume we take the position as short but, if the volume is not more than the previous candle then the second is to wait for the retracement and sell when the retracement is taken resistance on the neckline and come back in the downside.
Head And Shoulders Pattern Stop Loss: Stop Loss is one of the great factors that you never miss for intraday/any trading style. If I talk about head and shoulders pattern stop loss that is the perfect stop loss is the high price of right shoulders in any time frame.
Head And Shoulders Pattern Target/Exit: Profit booking is also important as like stop loss. If you do not know about the target of the head and shoulders pattern you can miss your profit sometimes so, you must know about the target.
In the head and shoulders pattern, the target is the high price of the head to the neckline is a perfect target. after measurement of the high price of the neckline to head. take the target from neckline breakout to that height.
Inverse Head And Shoulders Pattern
The inverse head and shoulders pattern is also a very profitable strategy for any trading style. But always we must remember some important things at the execution of the inverse head and shoulders pattern rules. These rules are very common to all Reversal Patterns that is
- Rule-1: Always remember that at the time of pattern breakout the Volume must be greater than the previous candle.
- Rule-2: Always take the trade at the breaking of important trend lines.
- Rule-3: Always remember that larger patterns are more powerful than smaller patterns.
- Rule-4: The Top is more volatile than the Bottom.
How To Trade Using Inverse Head And Shoulder Reversal Pattern
The Inverse Head And Shoulders Pattern is always formed in the downtrend and it reverses the trend in an uptrend. If I compare all the reversal patterns the inverse head and shoulders pattern is a more reliable pattern. This is the king of the major reversal patterns.
You know that the downtrend reverses into an uptrend when the downtrend line is broken and taken support on the downtrend line then the trend is reversed into an uptrend.
There is a point to notice that before the breakout of the trend line it makes the lower low. That two lower lows. The first is the left shoulder and the second is the Head. Another higher low is formed after the breakout of the trend line. This is the complete inverse head and shoulders pattern.
When should I buy/enter in inverse head and shoulders reversal pattern? Before, did you know about that when you buy it? you must know how to draw the Neck Line of the inverse head and shoulders pattern? The neckline of the inverse head and shoulders patterns strategy is very easy you pick the two-point first is the top of the left shoulder and head and the second is the top of the right shoulder and head and draw a straight line with both points that is the neckline of the inverse head and shoulders pattern.
Now, answer the question that is when should I buy an inverse head and shoulders pattern? There are two-point to buy first is when the trend neck is broken with the volume we take the position as long but, if the volume is not more than the previous candle then the second is to wait for the retracement and buy when the retracement is taken support on the neckline and come back in the upside.
Inverse Head And Shoulders Pattern Stop Loss: Stop Loss is one of the great factors that you never miss for intraday/any trading style. If I talk about inverse head and shoulders pattern stop loss that is the perfect stop loss is the low price of right shoulders in any time frame. I try to understand you in the picture that is given below.
Inverse Head And Shoulders Pattern Target/Exit: Profit booking is also important as like stop loss. If you do not know about the target of the inverse head and shoulders pattern rules you can miss your profit sometimes so, you must know about the target.
In the inverse head and shoulders pattern, the target is the low price of the head to the neckline is a perfect target. after measurement of the low price of the neckline to head. take the target from neckline breakout till that low.
Why Sometimes Inverse Head And Shoulders Pattern Failure
In the inverse head and shoulders pattern. you must be remembered that after breaking the neckline. It never crosses the neckline again if the prize crosses again the neckline it could be a sign of the failure of the inverse head and shoulder pattern.
There is two most important lesson, you must be remembered that the first non of the chart pattern is nonmailable. They work most of the time but never all the time. And the second lesson is the technical trader must be always ready that he/she could be wrong.
One of the keys to survival in the stock market is keeping the losses small, quite the losing trade as quickly as possible.
Conclusion
We learned everything about head and shoulders patterns and inverse head and shoulders patterns but before applying in your trading setup you must practice and backtest. Please say your view about this post in the Comment. Your comment is valuable to us.
I am a share market expert for the last five years. I have expertise in technical analysis, and fundamental analysis of stocks, and assets. On this website, I write content like analysis of shares, predict future targets of shares based on analysis, simplify technical analyses, and intraday trading.