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Hello, traders, and this session we'll be learning about head and shoulders pattern.
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Traders, have you read or heard about this pattern, if you have been trading for a long time, then
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for sure you would have heard or come across this pattern.
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Maybe you would have read about it in books, audio to watch videos about it, even if you have not
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heard about it.
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No problem, because today we are going to learn about this pattern.
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And also I'll be showing you how to have a competitive edge while working on head and shoulders pattern.
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OK, so let us start credentialled.
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The pattern can be formed during an upturn as well as downtrend.
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First, let's see how this pattern looks while working on uptrend when we are looking for buying opportunity
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in head and the pattern we call it as head and shoulders pattern bullish, which can also be called
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as inverse head and shoulders pattern traders watch closely.
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As of now, does just a drawing the head and shoulders pattern look somewhat similar to this?
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This is called a left shoulder.
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This is called as the Head.
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And this is my right shoulder.
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OK, now to consider this as the head and shoulders pattern, there are two conditions.
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The first condition is we need to have similar tops.
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So what do I mean by this?
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If I draw a trend line like this, can you see the height of all these scandals is somewhat similar.
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It has to be similar like this.
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This trend line is also called Nicklen.
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OK, remember this, but in the actual market.
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This is also considered as Nicklen.
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But this also can be considered as Nicklen, there might be 20 to 30 percent difference because in actual
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market traders make these patterns.
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We need to understand this.
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OK.
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Second condition is left shoulder debt has to be treated in the right shoulder debt.
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My left shoulder depth is so much.
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This has to be greater than the right shoulder depth.
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Which is this?
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Can you see the difference in depth?
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This is my second point, if both of this condition is met.
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Then we call it as head and shoulders pattern, OK?
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I hope you have understood the explanation so far.
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Now, I'll be showing you how gentle people are still following the old method by reading books or watching
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videos of so-called experts, I will use red color to try and show you how gentle people train.
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Does the left shoulder.
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Does the head.
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And this is the right shoulder.
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If their stock forms a candle like this about the right shoulder level.
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With good volume.
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And break out like this.
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They will take entry at the height of the breakout and.
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And target, they will keep the length of the head, which is this much.
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They will take it as much as target and place it about their entry price.
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And Stop-Loss, they will keep below the right shoulder.
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Traders, are you aware of the strategy?
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People have been following the same pattern after reading about it from books or learning it from people,
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so-called experts today will be learning a new way to train head and shoulders pattern.
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OK, so let us start.
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First, we need to wait for the candidate to form left shoulder.
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When the stock is in halfway to the right shoulder like this.
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We will draw a trend line.
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As soon as we get a breakout, kind of let us along with Walthall.
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We will enter the trade at the height of the breakout candidate.
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And Stop-Loss, we will keep at the low of the breakout and.
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And the target will be here, the same place where a lot of people are thinking about entering the trade.
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At this level, you will exit 80 percent of the quantity and your profit.
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For the balance, 20 percent of quantity, we will keep Stop-Loss about our buying price, which can
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be here.
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Why do we do this?
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Because in case the market goes up, we will be able to make extra profit.
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But even if the market goes down, we will still be in profit because the stop loss of the balance,
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20 percent quantity is about our entry price.
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Correct.
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Did you get my point?
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If you find this confusing, then just go a little back in the video and watch this.
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You will get full clarity.
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Now, traders, what can be the reason for me to tell you to buy at this level?
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There should be a valid reason for me to enter the trade at this level.
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Right.
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What can be the reason?
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Now watch closely, Lou.
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Hi.
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Hi.
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Hello.
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Hi.
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Hi.
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Hi.
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Hi.
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Hi.
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Then breakout with volume confirmation.
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What strategy is this?
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This is a second strategy, correct?
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We have complete one hour lecture about the strategy, not course, right?
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We have discussed how to enter and exit the trade and the strategy.
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So this is the reason for us to enter the street at this level.
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Traders, I hope you have understood this now why we enter the trade at this level right now.
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Let's see some examples in the market and see how Satija works.
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Trade as a first example sale in India, daily timeframe, OK.
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This is my left shoulder.
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This is my head.
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And this is my right shoulder.
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OK, left shoulder, head and my right shoulder to consider this as the head and shoulders pattern,
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what do we need?
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We need similar top.
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So if I draw a train line like this.
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Can you see they have similar top, correct?
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Now let's understand what gentle people do.
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See, traders, this trend line is also called Nicklen, OK, when this Nicklen breaks, the stock gives
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up Precourt.
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Can you break out here once a lot of traders, so they go to break out.
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Can you see the volume?
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How many people have entered the trade with the belief that the market will go up, but what did the
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market do?
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The market went down after going down what the market did.
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It took the stop loss of all the people.
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At this level, whoever had kept stock losses to cover all the stock losses, now, can you understand
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how people are following the same old pattern for a very long time, all the smart traders or big operators
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you can see, they understand that people will buy here.
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So what do they do?
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They make the market go up.
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And then a big fall and they take over everybody stop losses, but you price action traders, right?
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You understand this job.
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So what you do, you follow a strategy.
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A strategy is what?
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Hi at this hi.
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Hi.
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You wait for Precourt, so you get breakout, this breakout is also with Walloon confirmation credit,
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as you remember type two strategy, right?
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Breakout with volume confirmation.
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Now, our entry will be at the height of the blackout scandal, as Stop-Loss will be at the law of the
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blackout scandal, which is here at Target, will be.
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Where a lot of people enter the train.
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We already have seen where a lot of people enter the trade right after the breakout, you see volume,
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that is where a lot of people have entered the trade.
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So you will keep your target as this.
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At this level, you will book 80 percent of the profit, at this level, you will book 80 percent of
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the profit.
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So what do I mean by this letter?
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Said the code.
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You bought 10 quantity of the stock.
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As much as 80 percent of the stock eat, correct?
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So eight quantity, you will exit here.
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So the balance to quantity, that is 20 percent.
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For the balance, 20 percent, you will keep Stop-Loss above your entry price.
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OK.
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And with.
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For this 20 percent, if the market goes even higher, we will try to extract those profits as well.
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But if it goes down, no problem, it will be above our buying price, right.
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Anyways, you will make profit.
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This is my suggestion.
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But if you want to book your hundred percent profit here, you can absolutely do that.
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OK, so let us see one more example.
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Critter's a second example, is calling the daily Time-frame to my left shoulder.
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Does my head.
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To my right shoulder.
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So I've drawn a line like this.
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Traders have already told you in the market straight line will not come all the time, sometimes there
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might be 20, 30 percent difference.
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OK.
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So let's see what happened here at this Nicklen breakout Ganassi volume.
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So there was a breakout with volume, what will gentle people do?
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The gentle people will enter at the height of the blackout Kindle store, plus they will keep at the
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low of the breakout cattle rate.
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But to what happened, the market went a little up and then it went down.
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Exactly.
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Exactly.
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Kim.
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Took all the losses after taking desktop losses, the market went up.
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Traders do think this is coincidence.
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The market coming down exactly at these stop losses where a lot of people would have kept.
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It had this topless.
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And going up, what do you think?
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This is not at all a coincidence, but we are price action traders, right?
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What will we do?
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Does my law.
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This is my.
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It is my Hielo.
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And this is my high right at this level.
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I will draw a line like this.
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This line.
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Has given me a breakout.
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Can you see the breakout?
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This breakout is with volume confirmation, we will enter a day of the breakout, Kendall.
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Stop-Loss is the law of the blackout, Kendal.
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Today, it will be a lot of people are entering.
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When breakout happens, when you see volume that lot of people have entered you, you will exit 80 percent.
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Eighty percent of your total value.
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You will exit and the remaining 20 percent.
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We'll keep Stop-Loss on right here.
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And then wait for the market to go up.
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In case the market goes up, you will have extra profit, but if you wish to take all 100 percent profit
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here, you can do that the remaining 20 percent, you'll just leave it like that.
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And Stop-Loss will be above whatever price you bought here so that even if you lose this trade.
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Still, you will be in profit, right?
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So this was a second example, traders, I would like to explain something to you.
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With your train line, we get a breakout with volume confirmation.
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We enter the trade and we exit the trade when a lot of people are entering.
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Does this matter, which I have told you today, you will not learn it anywhere else.
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All the books you read or the readers that you watch, everyone will tell you to buy.
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At the Nicklen breakout, even my mentor told me to buy the Nicklen prickled after losing a lot of trade
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following the old method, we started back testing and figured out this method, which you have learned
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today.
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This isn't my age.
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We are made good amount of profits following this.
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The main reason you're watching a course is to learn something new so that you can be better at reading.
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Right.
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What is the point of AM teaching you the same things that are in the books, which is old method and
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do not work anymore?
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What we need to be smart when we are trading, when we are smart and we do hard work, the market will
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reward us very well.
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OK.
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Let's see some example on a lower timeframe, I'm taking Bank Nifty as an example, one minute time
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frame.
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OK, this is my left shoulder.
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Does my head.
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This is my right shoulder.
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If I draw a nicklen, letus.
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Commentary, what they will do.
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They will enter at the height of the blackout when they get volume confirmation, if you go to futures
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and see, you will get to know that there is volume here.
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Does Milo.
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This is my high.
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This dodgy candle is my high.
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This became my Hielo.
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To speak in my heart.
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This became my Hielo.
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At this level, if I draw a trend line like this.
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I'm getting a breakout, this breakout is with William Confirmation, you can go and check espera strategy
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ARANTES should be here, right?
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I have to play up and the target will be where a lot of people are entering right here.
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Now, let's speak about the issue that happens when we are working with partners on a war time frame.
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If you're working on one minute check.
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Right, can accomplish topless at the law of the candle.
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No, right, you need to give Buffer if you're trading on a lower timeframe, that is one minute to
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minute three minute four, five.
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We need to give buffer.
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If I have to give Baffo, can I give it here?
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No, right.
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It has to be somewhere here.
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Or here, right?
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Thank you so much for my stop loss, can I exit the trade here?
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No, right, because the risk to reward ratio will be very low in this example, you can see the market
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going up and things like that, that doesn't matter.
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There's just a one time thing because of poor ratio.
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OK, because of poor Ahrari issue, we cannot trade with batons or no overtime.
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But if you're working on a ten minute time frame.
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There is no need to buffer up to this level, right?
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You can keep a buffer at the low of the breakout candle itself at that time.
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If you enter the trade, you will get good at any time frame after 15 minutes is suitable for swing
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trading.
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OK.
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So in swing trading, also, that time, your target can be achieved and you will get good risk to reward
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ratio, but on a lower timeframe, let us ignore this pattern.
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Until now, we saw some examples of residential, the pattern on a bullish market right now, let's
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see some examples of bearish market.
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So what happens in potentially the British market?
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The candlesticks will form a pattern like this.
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Completely opposite to bullish head and shoulders pattern.
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This is the left shoulder to the head and does the right shoulder.
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As of now, this is destroying.
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To consider this as a head and shoulders pattern, there are two condition.
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First one, similar tops.
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Which is formed here.
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And then the depth of the left shoulder has to be greater than the depth of the right shoulder.
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If the condition one and two are meant.
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Then we call it as bearish, identical, the pattern, how do gentle people trade, they wait for the
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head and shoulders pattern to be formed like this.
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As soon as the Nicklen breaks.
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And the Bricktown candle is formed with the volume.
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They will enter the law of the president, Kanwal, which has given volume.
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Target, they will keep same as the length of the head.
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But how will we treat?
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We will wait for the left shoulder and the head to be formed.
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And at the middle of the right shoulder, we will draw a trend line as soon as we get a break down with
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volume.
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We will enter the trade at the law of the president, Kendall.
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Stop-Loss at the height of the breakdown, Kandal.
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And Target will be where general people enter the train.
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Now, let's see some examples.
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It as a first example for Don Trent, head and shoulders pattern, as I shall Motor Daily Time-frame.
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See, this is the Nicklen.
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This is my left shoulder.
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Does my head.
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This is my right shoulder, and Nicklen got broken than what general people will do.
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The gender people entered in the scandal.
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District, Candy.
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Can you see the volume?
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How many people have entered?
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But let's understand what happened the next day, the next day, the market opened only at the slowly.
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After people entering here.
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The next day, the market opened only at this level making extra loss for people at this level.
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A lot of people will keep the depth of the haters the target, right, so they would like Target here
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somewhere similar to the depth of the head, what the market did, it opened only in Capetown.
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And then the market went up and it took over everybody.
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Stop-Loss, who would accept it at this level.
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People went to what I kept a Stop-Loss here, right here or here.
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It took over all the Stop-Loss.
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Then what happened?
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The market went to the market can be so brutal to you if you just keep following the old method.
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Because everybody knows this is what is going to happen, whoever is new to trading will keep following
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this.
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They will lose all the money at this level and then they will see trading is a gamble.
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Right, but what will we do?
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Hi, Lou.
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Lubi.
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Lobolo.
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At this level.
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We will draw a trend line.
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We got to break down.
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This breakdown is with volume confirmation.
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Can you see the volume of this scandal is higher than the previous candle we have discussed completely
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about this in the previous lecture?
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Right.
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So our entry will be here.
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Love the pregnant Kandal Stop-Loss will be here at the height of the Bricktown candle.
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Our target will be where general people the at this candle.
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Will be a target with a booked to profits before the market reacted, let's take.
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We can book 80 percent of the profit here or hundred percent that is left to you, if you had booked
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80 percent profit here and 20 percent of their stock, if you would have just left it like that, it
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would have gone even lower.
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You could have booked extra 20 percent profit somewhere here.
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Right.
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So this was our first example.
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Now, let us the second example.
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Traders now let us see one more example on a lower timeframe.
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Hindustan, Unilever, 30 minutes time frame.
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OK.
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Is my left shoulder.
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And this man, Richard.
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Left shoulder, head and right shoulder.
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If I draw a neckline like this.
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At this level, you can see volume.
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There is William.
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General, people will enter here, right, and keep their Stop-Loss on Redhill here.
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Or here, right?
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So what happened after this, the market went up to cover certain people's toplessness.
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After that, the market went down.
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So we are prosection traders, what should we do?
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This is my high.
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Because my low, because my lower high and my level at this low, low we draw, this train line is giving
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us a breakout.
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This breakout is with volume confirmation.
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Can you see the volume confirmation here?
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So mother and father.
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Can you see volume confirmation the volume is more than the previous?
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Attentively, we had law of the Bricktown, Kendall Stop-Loss at the height of the breakdown, Kendall.
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Target, we cannot give this because we will not get proper relationship right, then what we will do
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will check for previous.
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What was the previous one?
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There was a resistance.
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This level.
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Or you can keep this level, did the market achieve your target?
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Yes.
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Right.
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So these were some of the examples for uptrend and downtrend, head and shoulders pattern.
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OK, traders, I'm not trying to say the market will always go against you, but if you enter the trade
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according to our strategy, you will have more pufferfish topless.
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That time, what happens is you can always escape the trap when you enter early and your surpluses are
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higher than what the market is expected to retries, then you have higher chances of staying in the
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trade for a longer duration.
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You just stay in a trade for a longer duration.
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Obviously, you can achieve this kind of profits, right?
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All we are trying to tell you is the old methods to not work anymore if the old methods do not work
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anymore.
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How can you expect to make profit in the stock market?
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Hope this video was useful.
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We suggest you to back test and make use of the strategy next time you come across.
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Head and shoulders, pattern traders.
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That's all for this lecture.
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I'll see you on the next one.
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