All language subtitles for 3. How to Trade Breakouts With Head and Shoulders Patterns

Hello and welcome back to cryptocurrency trading masterclass by wealthy education.

In this video, we're taking a look at how to trade breakouts with head and shoulders patterns.

The first thing that you need to understand is there are two different head and shoulders pattern.

There is the typical one, and then there's the inverted.

So let me draw out what the pattern looks like for you.

It's basically a.

Move that rising kind of pulls back a little bit, rallies again, as you would expect.

Generally, that's what markets do.

They just kind of slither the way up.

But the third.

There's a lower high, so you have an uptrend.

Higher, high, pull-back higher, high, pull-back, lower, high.

So think about what this means.

It means that we are seeing momentum die off head and shoulders, patterns very commonly followed.

So when they happen, a lot of people will jump on them just because they are there.

They also feature a couple of really neat additions to the pattern itself.

So if you draw a line.

Right across here, that's what is known as the neck line.

This is the head and these are the shoulders.

So, again, it is a high or high, a pullback, a high or high, a pullback and then a lower high,

it signifies that something may be up.

When you break down below what they call the neck line here, where you draw those three together,

the measured move, the implied move is the height of the head to the neckline.

So if it's one hundred dollars from top of the head to the neckline, then you are expecting one hundred

dollar move once you break down below the neckline.

Typically, the stop loss is put somewhere towards the top of the shoulder that you're breaking out

of, you know, some traders will change it around a little bit, but that's how they typically play

it.

And then obviously there is the inverted head and shoulders, which is simply the same thing, only

inverted.

It's at the bottom of a move lower.

You got a lower a low pull back, even lower, low pull back in a higher low again, works the same

way, but in reverse that you're inverted head and shoulders.

Once you break above the neckline, you take the measurement to say it's seventy five dollars and then

you extrapolate that out, put your stop loss on the other side of the shoulder.

Another thing that I would point out is they do not have to be directly up and down, they can be slanted.

And then your next line would be like that, that's perfectly fine, just as long as the last shoulder

is below the head.

So let me show you a couple of examples.

You can see Bitcoin is rallying here on the one hour chart.

You can also see that the market had rallied, rallied, failed to continue rallying, and then there's

the neckline.

Notice how.

The neck line right here.

Being supported.

Being supportive, I should say, we broke down and then we tested it and found it to be resistance

again, just like you would on any other pattern.

Now, the most obvious reason to like this head and shoulders pattern is the fact that it is right out

the forty thousand dollars level to major number that will attract a lot of attention you can take.

That measured move from the top of the head to the neckline extrapolated out from the breakdown, and

you can see that we clearly got that move.

Stop-Loss would go up here.

It's roughly a two and a half to one trade position, so it makes quite a bit of sense.

You actually got more.

And that's not that uncommon either.

But the pattern itself suggests a neck neck line to the top of the head.

You can also adjusted to perhaps try to figure out where the market's likely to stop based upon support

resistance.

You can see that's where we did so.

Once we broke through here, you would have been caught somewhere around thirty eight thousand eight

hundred and you would have gotten out at about thirty five thousand, or if you just look the pattern,

thirty six ish, thirty thirty six thousand two hundred or so.

And you can see the Bitcoin does follow this quite nicely.

So in this one, this is Tron, you can see that this was a failed rally.

So let me draw this out for you.

So this was interesting because we had been rallying before we fell, we tried to capture it and look,

it told us that, hey, we don't have enough momentum to go and it made the move.

It's also tilted, like I said, it could be.

Let's draw a couple of lines here, you can see that clearly we have.

Made the move even more than we had anticipated.

This is the four hour chart, so let's put a FEMA on this.

And you can see that the nine has.

Shown itself to be pretty reliable.

As it's the four hour chart, we can even go up a little bit.

The 20, as you can see.

In and out, but it broke that neckline and acted as resistance all the way down, nice little set up

right around three and a half since you started to see a little bit of selling pressure based upon the

big figure.

And then finally, let's take a look at Litecoin inverted head and shoulders, so.

The question is, is can you see it?

Well, I see a couple candidates for, for example, a small inverted head and shoulders.

There's also a bigger one.

And I would point out.

That we broke the neck line, we even came back into it a little bit and then made our move, your stop

loss would have been back here.

It would have been close.

But it certainly looks as if you would have made it.

Kind of depends on where exactly you put your plants, but you see the idea.

To get measured, move.

Extrapolated from here and you do get there, took a while granted, but you did get there.

This might have been interesting.

Let's go ahead and put.

Bollinger Band.

You can see that we had broken down through the Bollinger bands in the middle of it, this may have

been used in conjunction with the Stop-Loss placement that, hey, we broke out of that.

So this if you're training Bollinger bands, this in and of itself was a signal.

You take a look at this and say, hey, we just broke this head and shoulders pattern.

This is yet another reason to get long and again, like I said, somewhere right around here, you actually

hit your target, could have used other places to get out at, but you can see that it does kind of

line up quite nicely there as well.

So you can see that head and shoulders patterns are patterns that are.

Very visible, the higher the timeframe, the better they tend to to behave, depending on your broker,

you may or may not have higher timeframes available to you because some of these coins fairly new.

So it's not like.

The stock market where you might have 50 years worth of data and you can trade purely head and shoulders

patterns or inverted head and shoulders patterns based upon the weekly timeframe, but nonetheless they

do the rules apply in any time frame.

So with that, it is a pattern worth paying attention to.

And then if you can.

Find a couple of reasons to take it be on the pattern itself, you are really starting to put together

a nice little trade.

So the next video, we're going to take a look at how to trade consolidation's with rectangle patterns.