Trading with Head and Shoulders patternUsually the head and shoulders pattern perform at the end of channel up as a sign of a reversal trend.
In this chart, we can see channel already broken on October 23, but the right shoulder has not fully performed yet.
To trade with this pattern, we have a several conditions :
1. Wait for right shoulder to completely perform to touch neckline at 1.0530. As long as right shoulder not higher than head , this pattern is still valid.
2. After we have a perfect right shoulder, we need one candle full to break down the neckline as bearish confirmation .
3. Usually broken neckline will bounce at previous support to retest neckline . This is the right moment to enter short position
4. Best stop loss position is above right shoulder, as long as the risk reward ratio is still above 2
5. Head to neckline are equal to neckline to target (AB=CD). So in this sample we have 1.0361 as profit projection
note : consider this pattern as failure , If step 1 to step 3 failed to perform