Four effective rules to trade the head and shoulder chart pattern

The chart pattern trading technique is one of the most efficient ways to catch large market movements. You might be new to the trading industry but this doesn’t mean you can make big profits. The rookie traders in Hong Kong are losing tons of money because they don’t know the proper way to find great trades. Things are really easy when it comes to trading profession. But you must follow the proper guidelines and trade the market with discipline. To secure big profits by riding the major market movement, you must learn to trade the chart pattern. In today’s article, we will highlight four effective rules which will help you to trade the head and shoulder chart pattern.

Rule 1, use the daily time frame

You can’t make a profit by trading the head and shoulder chart pattern in the 1-hour time frame. The majority of the rookie traders are losing money since they trade the lower time frame. You have to understand the fact that the head and shoulder chart pattern is based on a bearish reversal pattern. This means you will be trading the market against the market trend. A small mistake will cost you a huge amount of money. But if you focus on the daily time frame, the chances are very high that you will spot the pattern with an extreme level of accuracy. Selection of the time frame plays a huge role when it comes to the chart pattern trading technique.

Rule 2, trade with the high-end broker

You must find a broker like Saxo or else you will never find the best possible trade setups. Visit https://www.home.saxo/en-hk to learn more about the premium features offered by the high-end broker. Never think you can make a big profit from this market without trading the market with the elite class broker. Unless you have access to a precise price feed, you can’t be sure about the quality of the chart pattern. Since the head and shoulder pattern is based on three significant highs, you must have access to the robust trading platform.

Rule 3, wait for a clear break

Unless you have a clear break of the neckline you should never execute the trade. The new traders in Hong Kong often place their trade right after the formation of the right shoulder of this pattern. But if you follow this technique, the chances are very high that you will lose money most of the time. Until you have daily closing of the price below the neckline, you should never execute short orders. Most importantly, you need to analyze the fundamental data or else it will be nearly impossible to assess the strength of the newly formed bearish trend.

Rule 4, use the price action confirmation signal

The price action trading strategy allows the retail traders to make a profit at the complex market condition. Being a price action trader, you need to wait for the bearish confirmation signal near the neckline of the head and shoulder pattern. This is often referred to as conservative trading technique. If you follow this technique, you can easily use tight stop loss and increase your profit factors. However, you might miss the good trades because the bears often become extremely aggressive and don’t give any chance to the price action traders to execute short orders. But still, it’s better to follow a conservative trading technique since it dramatically decreases the risk factors in the trading profession. Think twice before you execute any trade.

Conclusion

Trading the head and shoulder pattern is easy. Being a new trader, you can use the demo account to develop your trading skills. Never think you can change your life based on this simple chart pattern trading technique. It’s just a part of your trading profession. You have to rely on other factors and trade the market with managed risk.

Post Author: Jennifer Slegg

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