Head and Shoulders Patterns

Head and Shoulders Pattern on NZDJPY

Head and Shoulders Pattern on NZDJPY

Head and Shoulders Pattern on NZDJPY is a particular classical chart pattern namely head and shoulders continuation pattern.

The premise

If we take a look at the daily chart fo NZDJPY we can see that the pair is in a general downtrend. But, for the moment, the secondary trend is an uptrend which ends with a double top pattern. I don’t like to trade double tops because usually those kind of patterns tend to morph into something else. Therefore, I didn’t traded the double top pattern, but, after the completion of the double top, the price morphed into a head and shoulders continuation pattern.

Head and shoulders pattern on NZDJPY daily chart

Is it a head and shoulders continuation pattern or a flag?

That’s a good question that I had in my mind when I decided to trade this pattern. What’s the difference? Simple. The implications. A flag pattern is a half-mast pattern which means that the flag is usually located at the middle of a move. If this is a SHS pattern the target is the height of the head projected from the breakout level into the downside. So, what did I chose? The answer for me was simple. I chosen the safer variant, which, in this case is the SHS pattern. SHS stands for Shoulder Head Shoulder pattern. So, let’s see how did I trade it.

How did I trade the head and shoulders pattern on NZDJPY

As simply as it is I placed my sell stop order slightly below the February 18th 2020 daily candle low. Consequently my order is open only three days later on February 25th.

The outcome

The outcome of this trade is pretty simple if you look at the chart. And, the most important thing for me in this case is that I managed to let my trade run. Therefore, in this case the take profit order is hit after only three days.

The outcome of the head and shoulders pattern on NZDJPY daily chart

The conclusion

There’s not much to say as a conclusion in this case. As usually we have more to learn from the losses than from the winners. So, this is just a nice trade the went as expected and brought into my account an easy and nice 1% with only a half percent (0.5%) risk. Therefore, it is a 1:2 risk reward trade. You can always check may verified trading results here.

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