ULTIMATE Head And Shoulders Pattern Trading Course (PRICE ACTION MASTERY) (2023)

Introduction

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In this video we show you the Wysetrade Advanced Head And Shoulders Pattern Trading Strategy. The Head And Shoulders Pattern is used by many traders but is often used incorrectly. We combine all concepts from our past videos SO MAKE SURE YOU WATCH ALL OUR VIDEOS TO GET CAUGHT UP!

Video

Hey, guys, welcome back to another episode in this video we're going to show you how to use the head and shoulders pattern like a pro, including some Advanced strategies and techniques.

You won't find anywhere else.

Online, also, there is an over 100 page patterns, trading Master guide that works in combination with this video and is required to fully grasp all the intricate details of this video.

So here's exactly what we'll be covering in this video as always to show your support, please hit the like button, subscribe.

But most importantly, hit the notifications Bell so that you know exactly when new content is released.

Now to answer an important question, first, why are chart patterns such as the head and shoulders pattern important to learn and understand chart patterns show the movement of price, which tells a story and is a representation of what buyers and sellers are doing in real time, which is what price action is in a nutshell so let's get into it.

Here is the anatomy of the head and shoulders pattern left shoulder, head, right? Shoulder, neckline break up the neckline completes, the pattern and the reversal.

So let's show this right on the charts, Now The, Head and Shoulders pattern is a reversal pattern often used to identify a trend change from an uptrend to a downtrend.

The reversal Point here to the left is known as the left shoulder.

Your reversal Point here and swing high is known as the head and the lower high reversal Point.

Here is the right shoulder.

You have two same low reversal points here making a support level and is known as the neckline.

Once the neckline is broken.

Here price makes a lower low and The Head and Shoulders pattern is deemed complete and confirms the trend change from an uptrend to a downtrend.

So what does The Head and Shoulders pattern? Tell you from a price action standpoint, this pattern shows a loss of momentum from the buyers in the market as price failed to make a higher high here.

And instead made a lower high showing the start of a trend change.

Then once you had the lower low form, you have a new moving downtrend through the lower high and lower low together.

So let's show this again.

This is the Microsoft stock left, shoulder, head, right, shoulder, neckline once you had your breakup neckline here, this completes the head and shoulders pattern so going in the opposite direction.

This is the inverse Head and Shoulders pattern left, shoulder, head, right, shoulder, neckline the break of the neckline completes, the pattern and the reversal.

So on the charts.

Now, the inverse Head and Shoulders pattern is a reversal pattern often used to identify a trend change from a downtrend to an uptrend.

You have your clear moving downtrend through the lower highs and lower lows.

Your reversal Point here to the left is the left shoulder, your reversal Point here and swing low is the head and the higher low reversal Point.

Here is the right shoulder.

The two same high reversal points here make a resistance level and forms the neckline once the neckline is broken here.

And price makes the higher high The Head and Shoulders pattern is deemed complete and confirms the trend change from a downtrend to an uptrend.

So what does the inverse Head and Shoulders pattern? Tell you from a price action standpoint, this pattern shows a loss of momentum from the sellers in the market as price failed to make a lower low.

And instead made a higher low showing the start of a trend change.

Then once you hit the higher high form, you had a new moving uptrend through a higher low and higher high together.

Now, this is a very important lesson.

What we have showed you so far is what picture perfect, Head and Shoulders patterns look like, but oftentimes they won't.

Look this.

Perfect they'll, be more messy and not follow the pattern requirements exactly, but they'll be more rough.

Approximations of what the pattern should be.

These are what we call imperfect Head and Shoulders patterns.

So this is the DraftKings stock left, shoulder, head, right, shoulder.

So why is this an imperfect Head and Shoulders pattern? The reason is because this reversal Point here that usually forms the neckline breaks further below and doesn't line up perfectly side by side with the reversal Point here to the right now, here's the most important part because it is imperfect does not mean the pattern is invalid.

If you look at the bigger picture, this neckline here is still very valid, because you had four other reversal points, including the fifth reversal point being a false breakout don't, forget that the focus of a head and shoulders pattern is the lower high followed by the lower low making this a moving downtrend.

And none of this was jeopardized through the imperfection of The Head and Shoulders pattern as a bonus.

You also had a trend line here connecting the swing lows.

So the break of the trend line here is another Trend change confirmation so let's show this again.

This is the Delta Airlines stock again, this reversal Point here forms a bit lower and does not line up perfectly side by side with the reversal point to the right that forms the neckline making this imperfect, regardless you still had a great neckline Zone as well as a trend line that can be placed connecting the swing lows.

Once price breaks, the neckline and breaks the trend line with a lower low momentum candle.

This confirms the trend change from an uptrend to a downtrend again.

It doesn't matter that this isn't a picture-perfect head and shoulders pattern, because you still have your clear lower high and lower low, which gives you a clear moving downtrend.

What this all means is that the imperfections of the pattern don't affect the core price action, reversal rules.

So again, this is the bill.com stock left, shoulder head.

And what makes this imperfect is that your right? Shoulder does not line up perfectly with your left, shoulder and goes slightly higher making this an imperfect Head and Shoulders pattern, regardless this imperfect Head and Shoulders pattern is still very valid.

Because you had a lower high and a lower low form, which gives you a clear moving downtrend again, the imperfections of the pattern don't affect the core price action.

Now, one more this is the block stock formerly known as Square left, shoulder head.

But now the right, shoulder is slightly higher than the left shoulder and the right reversal Point here is higher than the left reversal Point all which makes this an imperfect Head and Shoulders pattern.

Again.

The reason this imperfect Head and Shoulders pattern is still valid is because you have a lower high and lower low, giving you a moving downtrend, meaning, the imperfections of the pattern don't affect the core price action.

Also something to note, notice how the larger trend is a moving downtrend.

So when you have a head and shoulders pattern form during a moving downtrend, this pattern formation would be deemed a pullback.

And then once it breaks below, this would signal a trend continuation downwards.

Now, a very important Point, not just for trading The, Head and Shoulders pattern.

But for trading all price action chart patterns, a lot of the time when you identify patterns, they will be imperfect because the market as a whole is noisy and imperfect.

So you must learn how to read between the lines and learn how to trade within that imperfection.

If you just sit on the sidelines and wait for the the Picture Perfect by the book patterns or setups you'll, miss out on 95 percent of the best trades.

So again, when identifying patterns look for rough approximations because identifying patterns is only one part of the trading equation and there's so much more, you need to take into consideration now moving on a head and shoulders pattern.

But instead of taking a breakout entry, taking a pullback entry at the neckline now on the charts left shoulder, head, right, shoulder.

These two reversal points here, give you your neckline.

Now, instead of taking the breakout entry, you would wait for a pullback entry to occur to the neckline followed by a Candlestick price action pattern to form.

Once it got there to show our reaction to the neckline and support turn to new resistance level.

This here could have been any Candlestick price action pattern that formed.

But in this case here, what you had was two candles with the Wicks sticking out and an inside bar Candlestick pattern, all which shows a reaction to the level once you add an intraday Trend change confirmation.

You would take short entries two again.

This is the broadcom stock.

And this is an imperfect Head and Shoulders pattern left shoulder double head or double top right, shoulder, neckline here.

Connecting these three points, you had your breakout entry here through the break of neckline with the momentum candle and a lower low forming or your pullback entry here so going in the opposite direction, an inverse Head and Shoulders pattern.

But instead of taking the breakout entry, taking a pullback entry at the neckline now on the charts left shoulder, head, right, shoulder.

These two reversal points here, give you your neckline again.

Instead of taking the breakout entry, you would wait for a pullback to occur to the neckline followed by a Candlestick price action pattern to form once it got there.

So again, left shoulder, head, right, shoulder.

These two reversal points here, give you your neckline again.

Instead of taking the breakout entry, you would wait for a pullback to occur to the neckline and new support level you along with candle showing a reaction to the level.

Now there were two ways to get into this trade.

One, wait for an intraday Trend change confirmation for an earlier entry point or two.

If you trade using only one time frame, trendline placed like this.

And once you had your breakthrough with the momentum candle, take a long entry now, moving on a head and shoulders pattern with a slanted neckline.

This is a higher quality, Head and Shoulders pattern.

Because price has already made a lower low meaning.

The downtrend is already in motion.

Now on the charts left shoulder, head, right, shoulder.

These two reversal points here, give you your slanted neckline again.

This is a higher quality, Head and Shoulders pattern or to be more specific, an overall higher quality reversal pattern, because you already have a lower low and lower high formed, which means this is a moving downtrend, even before the neckline breaks, then the break of the slanted neckline.

Further confirms the bearish momentum.

So again, left shoulder, head right, shoulder.

These two reversal points here, give you your slanted neckline, then the break of the slanted neckline and trend line.

Further confirms the bearish momentum so going in the opposite direction, an inverse, Head and Shoulders pattern with a slanted neckline.

This is a higher quality, Head and Shoulders pattern.

Because price has already made a higher high meaning.

The uptrend is already in motion.

Now on the charts left shoulder, head, right, shoulder.

These two reversal points here, give you your slanted neckline again.

This is a higher quality inverse, Head and Shoulders pattern or to be more specific, an overall higher quality reversal pattern.

Because you already have a higher high and higher low formed, which means this is a moving uptrend, even before the neckline breaks, then the break of the slanted neckline and trend line.

Further confirms the bullish momentum now, moving on a head and shoulders pattern with a slanted neckline.

But instead of taking a breakout entry, taking a pullback entry at the neckline now on the charts.

This is the Weight Watchers.

Stock left, shoulder, head, right, shoulder.

These two reversal points here, give you your slanted neckline.

Now, instead of taking the breakout entry, you would wait for a pullback to occur, followed by any Candlestick price action pattern to form.

Once it got there to show our reaction to the neckline.

In this case here you would a bearish longwood candle that formed.

Then once you had your intraday Trend change confirmation, you would take a short entry so going in the opposite direction, an inverse, Head and Shoulders pattern with a slanted neckline.

But instead of taking a breakout entry, taking a pullback entry at the neckline now on the charts left shoulder, head, right, shoulder.

You had your reversal point, one and reversal point two that created the slanted neckline.

Then again, once you had your break through the neckline, your pullback entry was here.

So again, you have your moving downtrend through the lower highs and lower lows left, shoulder, head, right, shoulder.

These two reversal points here, give you your slanted neckline once you had your breakthrough.

Your pullback entry was here.

So now let's get into the strategies section.

Now before we continue.

We have a very important question.

We need answered what chart patterns and price action topics.

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Now, two key points about the strategies, one, these strategies work on all asset classes, the same whether you trade stocks, cryptos Forex or any other asset type apply these strategies, the exact same way and two these strategies work, the same on all time frames.

Whether you trade, the very low time frames, such as the five minute time frame or the medium time frames, such as the four hour time frame or the higher time frames such as the daily time frame.

These strategies work, the exact same way foreign strategy.

Number one, identify a head and shoulders pattern for me at a key resistance level, or an inverse, Head and Shoulders pattern forming at a key support level let's show this on the charts, Plug Power stock.

When you look left, you notice the swing high level here where a price reversed from drastically giving you a key level of resistance.

So you would have had it drawn in and extended out.

Now as price approaches this level of resistance, you have no idea what will form or if anything will form at all.

This is what price action is, which is waiting for Price movement to take shape.

And then you react to what you see.

So when price got to the level, you had multiple entry points, but then you also had another entry through the head and shoulders pattern that formed right at the key resistance level, neckline placed below.

And once you had your break, you would take short entries through the lower intraday time frames.

So next strategy number two involves identifying a key level of resistance.

Candlestick price action, forming at the level, followed by a head and shoulders pattern inside on a lower time frame or finding a key level of support, then having Candlestick price action for me at the level, followed by an inverse, Head and Shoulders pattern inside on a lower time frame.

So let's show this on the charts, you had your key level of resistance because of this reversal point.

So you would have had it drawn in and extended out as price came back up.

You had shrinking candles, a candle color change and a long Wick candle, all which shows a reaction to the level as always a reaction does not equal a trade, because price can stall at the level and form candles and react to the level, but still push right through because don't, forget that this is a strong moving uptrend.

This is why you need to use a lower time frame, such as the one on the right to look inside of the Candlestick price action occurring at the level for any form of price action that signals a trend change from an uptrend to a downtrend.

This area here where the setup occurred is this same area here on the lower intraday time frame, notice how you had a perfect Head and Shoulders pattern form inside of the Candlestick price action, setup from the higher time frame, neckline placed below.

And once it broke, you would take short entries now going in the opposite direction.

So when you look left, you add your key level of support because of this reversal point, so you would have had it drawn in and extend it out.

So when price reached the level you had multiple long with candles, all which shows a reaction to the level as always a reaction does not equal a trade, because price can stall at the level and form candles and react to the level, but still push right through because don't, forget that this is a strong moving downtrend.

This is why you need to use a lower time frame, such as the one on the right to look inside of the Candlestick price action occurring at the level for any form of price action that signals a trend change from a downtrend to an uptrend.

This area here where the setup occurred is this same area here on the lower intraday time frame, notice that you had an inverse Head and Shoulders pattern form inside of the Candlestick price action, setup from the higher time frame, neckline placed above.

And once it broke, you would take long entries so moving on strategy.

Number three involves identifying a moving trend, followed by a pullback and Candlestick price action at the resistance level, then identifying a head and shoulders pattern inside on a lower time frame or identifying a moving uptrend, followed by a pullback and Candlestick price action.

At the support level, then identifying an inverse Head and Shoulders pattern inside on a lower time frame.

So let's show this on the charts foreign.

This is the pound dollar.

And if you have been following world events, the pound has crashed recently.

Now, if you are a price action, Trader, you would have spotted this short setup before the DraStic drop occurred.

So on the left is the pound dollar four hour time frame and on the right is the pound dollar 30 minute time frame you first, identify your moving downtrend through the lower highs and lower lows.

This is where your short trade setup occurred, because you had your resistance level as well as your trend line that crossed giving you an area of Confluence.

Once price reached the level you had multiple longwick candles showing a reaction to the level.

So we look inside of this area on the lower time frame on the right for our Trend change confirmation this area here where the setup occurred on the four hour time frame is this same area here on the 30 minute time frame, notice how you had a perfect Head and Shoulders pattern form inside of the Candlestick price action, setup from the higher time frame, neckline Place below.

And once it broke, you would take short entry points using our entry and exit strategy.

So moving on strategy, number four involves identifying a head and shoulders pattern, pullback entry.

And then looking inside of the pullback area for an intraday Trend change for a short trade or identifying an inverse, Head and Shoulders pattern, pull back entry and looking inside of the pullback area for an intraday Trend change for a long trade let's show this on the charts left shoulder, head right, shoulder, giving you an imperfect Head and Shoulders pattern price breaks through and pulls back to the neckline and resistance level and forms multiple long, wick candles showing a reaction to the level when you look inside of this area on the lower time frame on the right, you add a double top pattern form neckline here.

And once it breaks, you would look for short entries.

So next strategy number five involves identifying a head and shoulders pattern with a slanted neckline, then waiting for a pullback entry.

And looking inside of the pullback area for an intraday Trend change for a short trade or identifying an inverse, Head and Shoulders pattern with a slanted neckline, waiting for a pullback entry.

And looking inside of the pullback area for an intraday Trend change for a long trade let's show this on the charts left shoulder, head, right, shoulder.

These two reversal points, give you your slanted neckline price breaks through and pulls back to the neckline with multiple candles, reacting to the level when you look inside of this area on the lower time frame on the right, you had a descending triangle, pattern form.

Then once the pattern breaks below, you would look for short entry points.

So next strategy number six involves taking an aggressive early entry at the right, shoulder of The, Head and Shoulders pattern because the right, shoulder lines up with the left shoulder.

Meaning, it is a technical resistance level, or in the opposite direction, taking an aggressive early entry at the right shoulder of the inverse, Head and Shoulders pattern because the right, shoulder lines up with the left shoulder.

Meaning you are at a technical support level let's show this on the charts.

So this left shoulder here forms a technical resistance level.

When price reaches the level, you wait and see if you have price action that forms to show a reaction to the level, which you had through this very long, Wick candle, right at the level as always you need a trend change confirmation.

You can either use the bearish momentum candle off of the level before taking short entries or place.

A trend line below followed by a break before taking short entries.

Now, your traditional entry through the neckline breakdown here is still valid, which can be used to scale into and add to the winning position.

So next strategy number seven involves taking an aggressive early entry at the right shoulder, but combining the usage of multi-time frames and looking inside of that right, shoulder on the lower time frame for any form of trend change price action to get into the trade at an earlier entry point in the opposite direction, the same thing where you combine the usage of multi-time frames and look inside of that right, shoulder on a lower time frame for any form of trend change price action to get into the trade at an earlier entry.

Point let's show this on the charts.

The left shoulder here creates a resistance level, stretched across as price came back up to the level you had multiple along with candles reacting to the level.

Now, when you look inside of this area on the lower time frame on the right, you added imperfect, Head and Shoulders pattern where the head is also a double top neckline placed below.

And once it broke start looking for short entry points.

So again, so this is the Costco stock.

The left shoulder here creates a resistance level, stretched across as price came up to the level.

You had a Candlestick with the wick sticking out showing a reaction to the level.

Now, when you look inside of this area on the lower time frame on the right, you had an imperfect Head and Shoulders pattern with an upwards slanted neckline.

Once you hit the brake and lower low form confirming the trend change.

You would start looking for short entry points.

Now, let's get into a more advanced strategy.

This method we used for this trade is what we call true.

Top-Down, multi-time frame analysis and time frame Confluence.

We used three time frames to achieve a super accurate directional bias.

So on the left is the Plug Power stock weekly time frame.

And on the right is the Plug Power stock daily time frame.

This reversal Point here gives you your very key weekly level by now you should know that the key levels you find or that are visually obvious on the weekly time frame are a very high quality.

Meaning.

There is a higher chance that when price reaches these levels, they will react or reverse off of them.

So when price reached the level you had multiple candles with the Wicks sticking out and failing to break through showing a reaction to the key weekly level as always you don't trade off the higher time frames.

But when you notice price reacting to these very key higher time frame resistance levels, you have a very strong bearish bias.

Now, when you look inside of this area on the daily time frame to the right, you are also looking for bearish Price action to match the bearish bias.

You had after analyzing the weekly time frame so that you can get two time frames being confluent and giving you the same directional bias now on The Daily, you would bearish price action by first having an RSI Divergence form right at the weekly level.

But also two short entries that already occurred off the weekly level.

Now entry, number three came here at the right shoulder.

The left shoulder creates the resistance level across.

Then when the right shoulder came up to this level, you had multiple candles reacting to the level and failing to break through.

So we need to look inside of this right, shoulder for Price action that signals a trend change from an uptrend to a downtrend.

So let's pull up the four hour time frame and put it beside this one now on the left is the daily time frame.

We just looked at and on the right is the four hour time frame.

Again, this level here is the very high quality weekly resistance level.

The right, shoulder, short, trade opportunity on The Daily.

Here is the same area here on the four hour time frame, this can be seen as a form of double top pattern, or if you work off of candle bodies, this can be seen as a descending triangle pattern, regardless of what you use neckline Place below.

And once you add your break below and lower low form, you would go to the even lower time frames to find an exact entry and exit Point using our entry and exit strategy and key tool.

Now remember why this is such a killer entry, you have your weekly time frame or higher time frame, giving you a bearish bias.

You have your daily time frame or medium term.

Time frame, giving you a bearish bias.

Then you have your four hour time frame or lower time frame.

Also now, giving you a bearish bias and bearish price action.

All your Three core time frames are confluent because they're giving you the same directional bias, which is downwards.

So your short entry is very accurate at this point when we have trades with such a high probability of success where we almost know exactly where price will be going next.

We take more aggressively sized entries, which we cover in depth on our site at wisestrade.com also on our site, we have a massive over 100 page patterns trading guide that works in combination with this video.

It gives you every possible pattern, variation and combination shows you exactly where to enter and exit where to place your stop loss, trade management and a lot more detail.

We don't have enough time to cover all in this video having this guide is essential for not only trading The, Head and Shoulders pattern.

But for trading all chart patterns so go to wisestree.com and get access to it right away.

Also right now in the comments below tell us exactly what video topics you want us to cover next as we always look through the comments, four topics or topic suggestions again and again, to decide to decide on our next video.

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