Chart pattern trading methods can help you to secure big movements in the market. Most of the time, naive traders in Singapore don’t know how to trade a significant reversal. Trading the major reversal is a very challenging task, and you need to rely on the advanced form of market analysis. The pro traders at Saxo rely on the chart pattern trading strategy because it allows them to make a big profit without any hassle. There are tons of chart patterns, but which pattern should you use? In this article, we are going to discuss the head and shoulder chart patterns. Read this article very carefully so that you don’t have to lose too many trades in the market.
Head and shoulder pattern formation
The head and shoulder pattern is usually formed based on three major points. The first high is known as the left shoulder, the peak is known as the head, and the third high is known as the right should. The neckline acts as the support line from where the price starts to rally higher. Most of the time, traders execute the short order after the breach of the neckline. Being a naïve trader, you might not understand why this pattern is so popular. This pattern allows you to trade the major bearish reversal in the market with a high level of accuracy.
Looking for the patterns
To find the best possible trade setups, you need to look for this pattern in the higher period. The elite traders at the Saxo capital markets pte, always suggest using the daily or weekly time frame to trade this pattern. If you trade this pattern in the lower time frame, it won’t take much time to blow up the trading account. Being a naïve trader, you have to look at the long term goals. Forget the fact; trading is all about taking a high risk. It’s more like dealing with low risk. Once you start to find the pattern in the higher time frame, you need to learn about the trade execution process.
Trade execution process
The trade execution process is fairly simple in the head and shoulder pattern. As soon as the price break the neckline you need to short the pair. However, shorting the pair right after the break of the neckline is often known as an aggressive trading method. If you want to keep your fund safe, make sure you learn to analyze the price data in the higher period. And look for the minor bullish retracement so that you can place the trade without using a wide stop loss. Most of the time, it will be hard for naive traders since they are a little bit aggressive when it comes to the trade execution process. So, learn to trade the market with managed risk and follow the safe path at trading.
Trade with low risk
After learning the details of the head and shoulder pattern, some of the retail traders often get carried away with emotions. They start placing a big lot of trades with big hope that they can earn a considerable amount of money without losing too much. But look at the experienced trader. They never take too much risk in any trade since they know the outcome of any trade might result in loss. Being a professional trader, you must train your mind to accept the losing trades. Remember the fact; the very best signals are bound to lose money at times. You need to be prepared to lose trades regularly or else it will be tough to survive in this business.
Learning about the head and should pattern is easy. But to earn a consistent profit, you need to follow strict discipline. Stop chasing the trend and stick to your goals. Be a brave trader so that you don’t end up trading the market with emotions.