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Head and Shoulders Patterns

Head and Shoulders Pattern on AUDUSD

Head and Shoulders Pattern on AUDUSD

Head and Shoulders Pattern on AUDUSD is the little brother of the Head and Shoulders Pattern on EURUSD since it was completed a day after the EURUSD.

The premise

One of the best signs a trader can get is when several trading instruments get ready to do the same thing. Therefore, in this case, both EURUSD and AUDUSD charts looks pretty much the same. So, you can check the EURUSD daily chart here: Head and Shoulders Pattern on EURUSD. You’ll find more about the localisation of this pattern and much more. Below you can see the AUDUSD daily chart.

head-and-shoulders-pattern-on-audusd-daily-chart
Head and shoulders pattern on AUDUSD daily chart

How did I trade the head and shoulders pattern on AUDUSD

Since everything is clear, all I had to do was to place my sell stop order. And I placed it slightly below the January 8th 2020 daily candle low. Consequently my order is open on January 21st 2020. After the breakout, the price is going to retest the previous high and go back near the opening price of the same day. Also, the next day, the price is going to retest the low of the breakout day. So far, so good. The 4th day after the breakout is a key day. So, it’s January 27th and the price is opening with a gap which remains unfilled. That’s a breakaway gap and its a very good sign. Therefore, in the same day the price dropped 65 pips and stayed there.

The outcome

After the huge drop the price stayed in a narrow range for another two days. Also, this is the place where I decided to collect all my profits from this trade. And, as you’ll see in the chart below, it was not a good idea. I was afraid of the small support from the left. And that is not a good thing. At least not in trading. That decision made me “let on the table” half of the profits. After I closed my trade, guess what happened? Another 63 pips drop in the next two days. That small support level was broken the next day and the take profit order would’ve been hit. I’m sorry for collecting my profits earlier, but it’s too late. All I can do now is to learn another lesson.

the-outcome-of-the-head-and-shoulders-pattern-on-audusd-daily-chart
The outcome of the head and shoulders pattern on AUDUSD daily chart

The conclusion

The obvious conclusion is that after few loses in a row, now it’s time for payback. Even if I collected the profits earlier this is still a good trade. As many traders out there use to say: patience is the key.

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