This article looks at the forex signals you get with the head and should forex chart pattern.
When you trade on the forex market you need to know about all the forex signals that you can use. There are a lot of traders who look at chart patterns as a means of getting the forex signals they need to trade with. One of the forex patterns that you need to know about is the head and shoulder pattern. You should consider what this pattern looks like and what you are getting from the pattern. You also have to consider how you are going to find forex signals with the pattern and how you trade on the forex signals that you get.
The Head and Shoulder Forex Pattern
The first step in getting forex signals from a chart pattern is to know more about the pattern. The head and shoulder pattern is a reversal pattern. This means that it tells you when the market is about to change direction. There are a number of points to the pattern that you have to know about if you want to trade on it.
The chart pattern is made up of three peaks at varying heights. The first peak is considered to be the first shoulder of the pattern. This will be a new high on the price action. This will be followed by a retracement and then a new peak. This second peak is the head and will be at a higher price than the first peak of the pattern. There will be another retracement before the last peak of the pattern. The last peak is the second shoulder and should be around the same height as the first peak.
It is possible to have an inverse head and shoulder pattern. When you have this pattern the peaks are going to be new lows in the market. The overall pattern formation will be the same otherwise.
Getting Forex Signals from the Pattern
The forex signals that you get from the head and shoulder pattern will be for a new trend in the market. The signal to start trading comes after the last peak of the pattern. When the price action moves past the lows of the pattern then you are meant to start trading.
It is important that you wait for the forex pattern to be fully formed before you trade. If you do not wait for complete formation then you could trade on the wrong pattern. While the head and shoulder does not have many other patterns that form in a similar manner there is the chance that the pattern you are looking at is a different one.
Using Indicators with Patterns
When you trade on the head and shoulder forex chart pattern you should consider combining this with the technical indicators. When you combine the patterns and the indicators you are able to verify that the price movement is strong enough for you to trade on. If the movement is not strong enough to trade on then you should not complete your trades. There is no way for you to know this is you are not using indicators with the patterns.
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