Charting From a Different Perspective
March 12, 2007 by Trader Rich
I was reading DailyFX's weekly trading lesson today and doing so pushed me to exploring something entirely off the subject. But first, let me talk a bit about the lesson content. The lesson was on head and shoulders chart patterns. I certainly have read enough about chart patterns, head and shoulders being one of them, but I've actually never traded this chart pattern. The lesson is short and basic and if you don't know much about the pattern, you can read the lesson at http://www.dailyfx.com/story/strategy_pieces/weekly_trading_lesson/Weekly_Trading_Lesson__Head___1173715146697.html.
The example the author gave pertained to the EUR/USD on a 1-hour chart. The head and shoulders pattern is actually still in play as I write this. In looking at the picture of his chart, I could clearly see the two shoulders and head. I then went to my Metatrader charts and opened the 1-hour EUR/USD but I could not see the pattern. Here's what I saw when I opened my charts:
I don't see the head and shoulders, do you? Call me stupid but I never thought about getting a different perspective by changing the zoom level on my charts. I usually only zoom out at the most one level on my Metatrader charts. But yet again, I never really thought about zooming out further. Yes, I feel like quite the amateur but here is what the same chart looks like zoomed out two more levels:
Do you see it now? It isn't perfect but it's pretty evident.
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Isn\’t the neckline just a simple support line?
So now it might be forming a double top since today it’s trading above a bounce off the shoulder line. I’ve never been able to trust chart patterns enough to follow them.
Also it is trading at just below last weeks high after breaking it briefly and also above yesterdays high. I’m trying to focus my trading more on these areas and less on traditional chart patterns. We’ve also just above 3200 and the “experts” say those 00’s are important also. So there’s quite a bit to think of.
The problem for me becomes how do I form a structured strategy to find an edge using these areas?
Yes, the neckline is a support line. According to most, the pattern is complete once the price breaks the neckline.
Frank, that’s the million dollar question. I have a hard time with chart patterns because if it doesn’t work the first time, I tend to move on. I guess the key is consistency.
hi, Folks,
this Head and Shoulder is not anymore valid, when the acutal rise goes higher then the right shoulder.
It also seems, that a real head and shoulder should have the same space between shoulders and head on both sides.
This is not the case here.
Metatrader - switch to H4 and you will see it…..