The Head and Shoulders Pattern

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Full Transcript

Today’s topic is the best indicators for day trading futures– head and shoulders. Head and shoulders is a reversal pattern.

And they are spotted quite often. They are not congruent. You normally will not see a head and shoulders fully aligned.

For instance, a good head and shoulders will not be in a perfect symmetrical line. However, they are really important to spot because when you start to see a head and shoulders in the making, you could cool it. You could sit back in one and wait until the market shifts direction and a lot of times it will shift direction.

So what is a head and shoulders? It’s exactly that. It’s a head which has a high pivot and two shoulders. OK, but kind of think of a hunch back person of a show for the shoulders because they are rarely ever fully symmetrical.

So here we go. This is a shoulder. This is a head. And here is another shoulder. So this is what I’m seeing when I am in the live market, right?

Here I am. I am looking at a nice, strong move up. And I am not even paying too much attention to this just yet. Right. However, I am noticing that now it’s starting to retrace. And it does a good retrace. And then my next pivot here is not going to this particular pivot. Right.

So if it’s a strong movement up, we want to see it continue further. Right. We want to see it continue upward. I am not seeing that. So what I’m seeing is a try to go up and it goes back down. It now starts to hang out a little bit.

So now I am starting to see the formation of a head and shoulders and look what happens.

Bam!

It gives me a reversal pattern.

Here’s another good, good one to see. So here we are. The market is going down, right? I’m going down and now I’m having a nice pivot that goes a little bit below this. At this point, I’m already wondering why isn’t it not going as far as it should?

And it really retraces here. Right. But it doesn’t retrace too far up and it starts to go down again. So obviously, this is now showing me a complete slowdown in the market. But look at this.

It’s not going further down at this point. I am most definitely going to see a reversal happening when it happens. I’m not sure, but bam, there it goes. I start to notice this already as a head and shoulders setting up again.

This is purely indications to show you when the market could change direction because the last thing you want to do is be on the wrong side of the market. Right.

So when we just start to see any sort of reversal patterns, indications telling us that the market is about to turn. We want to read them. We want to understand them. Here’s another really good one as well. So obviously the market is a little bit choppy, but overall it’s starting to go higher and higher. Right.

And then again, it’s starting to show me that it’s slowing down here and went high. And then it did a retrace and then it went much higher. So here is one pivot.

And now here’s the other pivot and look at this next time it goes up. It does not go very far at this point when I’m starting to see this.

I automatically recognize, OK, this is a head and shoulders and then I step back, I wait to see what happens.

And bam.

I get to see what happens here. OK, so this is now the formation of the new head and shoulders. I don’t know that this is going to be a head and shoulders until around here when I start to wonder what’s going on right now and waiting for this particular point to show me if it’s gonna start to head down.

If it starts to head down, then great. That means the direction is headed down. But when it’s giving me this kind of movement. It’s not going anywhere.

That’s when I start to think, OK, this is now a head and shoulders forming. And I’m sure there’s going to be a reversal, which exactly is what happens. So this is a mini lesson on what head and shoulders looks like, one of the best indicators for day trading futures. So when you’re looking for head and shoulders from an uptrend, you always want to look at the pivots at the top and the same when you’re looking for head and shoulders from the downtrend to show you that there’s going to be a reversal to the up.

You want the pivots to be at the bottom. I’m Marina, the trader chick. The total from the trader chicken. If you want to check out some more videos or more information, come over to my site and talk to you soon.

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