In this video, you will learn how to identify and trade using the head and shoulders pattern.
This is a bearish reversal pattern. You locate this pattern at the top of an uptrend. It is characterized by a left shoulder, head, right shoulder, and a neckline, which acts as support.
Once you have identified this pattern, one way to trade this pattern is to wait for the price to break below the neckline. Now, you can place your short entry here. Make sure that you see a candle close below the neckline. The stop-loss can be placed above the right shoulder. Take the distance from the head to the neckline and use this measurement from the neckline to the downside for finding out the take-profit.
The conservative way to play this pattern is to wait for the breakout to happen. Now wait for the price to retest this broken support line. This could act as resistance. You can use a small stop-loss in this case. The take-profit remains the same.