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Head and Shoulders Patterns

Head and Shoulders Pattern on NZDCAD

Head and Shoulders Pattern on NZDCAD

Head and Shoulders Pattern on NZDCAD is a very nice top at the end of a pullback. And, it has everything it needs for a nice breakout into the downside. Let’s see how it worked.

The premise

Let’s take a look at the daily chart of NZDCAD. Certainly anyone can see that there is a downtrend. Also, it is easy to see that the price initially went down. At some point, it formed a bottom. Finally, after the bottom was made, the price retraced at 50% from the entire move down. Therefore, this is the place (50% retracement) where the price formed a head and shoulders pattern.

head-and-shoulders-pattern-on-nzdcad
Head and shoulders pattern on NZDCAD daily chart

How did I trade the head and shoulders pattern on NZDCAD

As I also said in this article: Inverted Head and Shoulders on USDJPY for a successful trade, one needs two things. Timing and direction. If one of those are missing there is no successful trade. In this case, I placed my sell stop order under the low of January 8th 2020 daily candle. My order is open on January 29th.

The outcome

Everything went fine in the first 3 days. As a result, the price made new lows every day until February 3rd. The February 3rd is the first day of the beginning of the retest of the broken neckline. Nothing abnormal so far. It is perfectly normal for the price to retest the previous broken support. But, the emotions stepped it. Consequently, I lowered my stop loss slightly above the February 3rd daily candle.What happened next? That’s right, the price retested the broken neckline of the SHS pattern and went back down. But guess who got his trade closed during the retest? Yep. That’s me. Let’s take a look at what happened after the retest.

the-outcome-of-the-head-and-shoulders-pattern-on-nzdcad
The outcome of the head and shoulders pattern on NZDCAD daily chart

The conclusion

I think there is nothing more to say about this trade. The main reason why I missed the entire move down was my own fear to lose another trade. And, to achieve success in trading, I really need to change that fear.

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