head and shoulders that better not to trade

١٨ فبراير ٢٠١٩

hey guys,

as you probably noticed I am a big fan on head and shoulders pattens :)
however, I dont trade all of them and this trading idea will be focused on a type of a H&S
that is better to exclude from you trading strategy.

so there are 6 types of H&S:

one with horizontal neckline,
one with rising neckline,
one with falling neckline

one inversed with horizontal neckline,
one inversed with rising neckline,
one inversed with falling neckline

on the chart we have an inversed head and shoulders with a rising neckline.

Trading head and shoulders pattern we always wait for a violation of a neckline and
execute the order when the market closes below or above a neckline depending on the type of H&S.

trading inversed head and shoulders with a rising trendline can significantly affect our r/r ratio.
on the chart I have illustrated 2 different scenarios:
1st scenario is based on an immediate neckline violation without consolidation and side moves.
2nd scenario illustrates more time that the market spends below a neckline.

and look how it affects our r/r ratio.

same logic with a classic head and shoulders with a falling neckline.

from my personal experience I decided to just avoid such H&S

I hope it will be valuable for you!