[00:02] in this video we will analyze the classic head and shoulders pattern, its problems, inefficiency and how smart capital is lured into a trap by inexperienced and poorly informed traders. Before we begin, I recommend subscribing to my
[00:14] telegram channel here I write about trading analytics and thoughts on the market in it you will information for yourself as a trader follow the link in the description under the video as you already know from the previous two videos, classic patterns can
[00:29] context and this does not happen as often as everyone would like head and shoulders is no cases such a formation will not work as you would expect. Let's start with a
[00:41] scheme that most of you have seen and know because it is taught in baxi books for retail traders. Head and shoulders is a typical reversal pattern, the formation occurs by the formation of 3 and beads of the formation of 1 x, that is, the left
[00:55] to move in the opposite direction for a short time, after which the upward trend continues and a higher maximum is formed, which will be considered the head and then the movement in  In a downward direction and a short-term correction, a
[01:09] lower peak is created at the level of the left shoulder, which will be the right shoulder, after which these three highs are connected to each other, which is the head and shoulders pattern. The short-term low and where the upward
[01:22] movement began determine the neckline, which now supposedly acts as a support zone, and after it is broken, a zone of resistance will emerge from where the price should begin a downward trend. Terry, according to classical theories, is determined by measuring
[01:35] the distance from the neckline to the head, after which the range is projected below the neckline, which will be the goal. Every trader who is just starting to trade will use this pattern and others worse because they are quite
[01:48] primitive and take into account a minimum number of factors. At the heart of the pattern is the picture itself, which is convenient and does not require in-depth study of anything without taking into account the context in which this formation is formed. It will be worthless.
[02:00] Another reason for unprofitable trading will be a low understanding of the theory. The masses are looking for head and shoulders on lower timeframes. In many cases, when the price is in a discounter, in most cases, the work will be the opposite of your expectations, and the
[02:14] goal will be liquidity.  Above the maximum, which is called the head, when the neckline is broken, I see an opportunity to open a long position, especially if the price is above the muzzle. Market makers form such
[02:27] popular patterns in order to lure as many traders as possible into a trap. After this, the newly formed liquidity will be used to evaluate the asset, and the mass will remain with losing trades. Sell stops that were activated when
[02:40] going beyond the neckline are used by smart capital for buying on the bureau or increasing the position. It is at this moment that the best opportunity to enter a trade is an inverted head and shoulders. From a classical point of view, this is a bullish
[02:54] reversal pattern. The formation occurs with the formation of 3lau. After the formation of the first minimum, that is, the left shoulder, the price begins to move in the short term against the false side, after which the downward trend continues and a
[03:06] lower minimum is formed, which will be considered the head, and then an upward movement begins, and on a short-term correction, a higher minimum is created at the level of the left shoulder, this will be the right shoulder, after which these
[03:19] three minimums are connected to each other, which is a bullish head and shoulders pattern, and the short-term maximum and where the downward movement began determine the line.  The neck, which now supposedly acts as a resistance zone, and
[03:33] after its breakout will act as a support zone from where the price should begin an upward trend, the targets are determined as in the previous diagram, the range from the neckline to the head is projected above, which will become the place for placing a take
[03:46] profit. When the neck level is broken, a stop loss is activated for buying. This can be considered as a cake formation in laurels, and according to the swing structure and the continuation of the general direction of the price, this is an opportunity to open a position
[03:59] after traders are driven into a former trap with the goal of updating liquidity below the head. Now let's look at several examples from this context so that you can see how this works on real charts. Even if you are an
[04:11] ardent chartist, you will still be able to highlight many important nuances when such a pattern should be considered and when it will not be relevant. In general, with a high probability, you will be able to determine when a trap is formed for
[04:23] traders. This is a weekly timeframe chart, but here we will not consider any patterns. We will quickly look at the context where lower timeframe. You may notice that 1 resistance zone is highlighted here, the
[04:38] vision of an overlapped one.  imbalance which has already been filled and the first support zone in the form of a bullish artbook and an overt imbalance which is also a magnet for the price. Besides the fact that the price has tested the resistance zone, we
[04:50] see a potential range and a maiden from above which in such a context often leads to maidens from below, that is, the general direction of the price is expected to be downward until the price activates a stop loss for sale which is located behind
[05:02] this fight and does not test the first support zone. Now we switch to the daily timeframe and here we can consider the current range of the upward movement which entailed a maiden from above formed a
[05:14] trend liquidity for each fight which was formed here. Stop loss rings for sale, they act and will act as the reason for such an aggressive downward movement. At the moment, we see that the price has filled an
[05:26] intermediate imbalance which was the reason for the short-term growth of the first resistance zone in the form of a breaker which is on this lula. This is the resistance range from where we want to see a reaction. Definitely on the 4-hour timeframe.
[05:38] Now we can look at the 4- hour timeframe on which the false head and shoulders pattern was formed. In addition to the higher timeframes, we situation to more accurately determine the point of the future reversal. As you remember,
[05:52] on the daily timeframe I showed the breaker, this is the main resistance zone. On a lower timeframe, we can find a trigger point from which the price will react. In this case, you can see that there is an uncovered
[06:04] imbalance and an untested order, which can serve as an excellent entry point for a position. Personally, I do not use such zones of interest because they are higher, otherwise the proud book is equal to x, and which partially reduces the likelihood of
[06:18] our transaction being realized. Therefore, in such situations, I would wait for the start of a bearish order flow after it fills the balance and tests the bear against the book. After the formation of the son, I would look for a position. The intermediate target will be the
[06:30] minimum, which in this pattern is minutes. Sagalova's main target will be a lawyer loop swing structure because we expect the continuation of the downward trend. It is also very important to determine where the pattern is formed in the premium or discount
[06:43] about Fibonacci, I remind you that we are interested in opening short positions in the premium zone, opening a long position in the discount zone, accordingly, we stretch.  The Fibonacci grid from this x to this lo and the range from 0.5 to 1
[06:58] is considered premium prices. The marked order block is in deep premium dawns relative to the usual head and shoulders pattern. Retell traders expect that after a breakout of the neckline, there will be better buying opportunities,
[07:12] which will provoke a mass opening of a lunging position. We, in turn, understand the context in which this pattern was formed and can assume that with a downtrend will continue. Therefore, after the breakout, these are supposedly
[07:26] resistance zones. Accordingly, after activating the stop-loss order for a buy above, I quietly IV and filling the balance, we can open a short position. Or the second option for opening a position would be to fix the price back behind these highs.
[07:38] Now we are watching the development in this range Those stop-loss orders for a buy are activated here and now we are expecting the
[07:50] start of an upward movement. We look at the next candle and see that the price aggressively cuts off below and updates the right shoulder. This was a butch trap at premium prices. Thus, smart capital formed
[08:03] liquidity on both sides and used it for its own purposes for re-distribution. it for its own purposes for re-distribution. position was not of interest to me due to the presence of these equal x and y, and I
[08:15] try to skip such positions, but now an opportunity has arisen to consider a high- quality short position. This minimum is a breaker of a newly formed resistance zone, from where, with a high probability, we can see a reaction and
[08:28] continuation of the downward trend. The position will be opened based on it in order to update the previous structural element.
[08:41] even lower, it collects liquidity behind the local structural break, which confirms the bearish harp. Then there was a watermelon main, after which the price pastel the breaker area and received an excellent reaction. You can notice
[08:53] that now this candle shadow acts as a bearish block order, therefore, in the future, we can get a reaction from it to continue the downward trend.
[09:06] The price consolidated in this range for some time and there was also a return on the river, the block mute, and then the price reached the target. The pair is not an open position. The risk-reward ratio is 1.4 and a half, which is better. This is a good result,
[09:19] considering that football on a higher timeframe is more likely if you were in  If we switch to a 15-minute time frame in the interest zone, for example, then you greater potential. And if we look at a certain
[09:33] distance, then we could trade 11 percent of the price movement in a downward direction, regardless of whether you open a scalp intraday or swing position. Here, there was an opportunity to open several
[09:45] high-quality trades if you understood the general price direction. Now we look at the further development of the trend. Here, after some time, Here, after some time, another former head and shoulders pattern appears,
[10:03] We do absolutely everything that we did last time. We determine where the premium zone will be by extending a Fibonacci correction from this x to this one, and everything above 0.5 is premium prices where we will be interested in opening a
[10:17] prices where we will be interested in opening a short position. after the neckline is broken. We will expect a downward movement in order to update the structural aloe, that is, the head, because the price is still in a
[10:32] reached its interest zone, from where the trend could reverse. Now let's look at further development after one candle, the price again tests the bearish order block. I'm not interested in entering a position in such a zone because I don't
[10:48] use the artbook breaker mitigation god. During a retest, if a downward order flow begins, I'll simply open lower timeframes locally. I'll look for a setup to enter a quality position now. I won't do this because
[11:01] the topic of the video is completely different. So, let's look at further development. develop and a stop loss for sale located by the collateral, which is called the
[11:13] head, in this pattern were collected. Here, 2 excellent bullish traps are shown that are formed by market makers to encourage traders to open positions in the wrong direction. You can conclude that the pattern itself is not of great
[11:26] importance without taking into account the context. In most cases, the development of such patterns will be the opposite of your expectations. Now let's move on to the next example. But first, let's consider the context in which the pattern is formed. This is the same chart as shown in the
[11:39] shown before. On the weekly timeframe, the first resistance zone and the first support zone are determined. The logic is that after testing the resistance zone, we expect  downward movement to the first support zone, that is, the
[11:52] bullish breaks ru and vice versa. If the price first tests the bullish breaker, we will expect that the price will begin an upward trend and fill the imbalance. Now switch to the daily timeframe and here you can see a
[12:06] bearish head and shoulders pattern. In fact, everything is absolutely the same as in the previous examples. We define a discount zone with a Fibonacci stretch from this lua to this piggy bank. The range below 0.5 to
[12:19] one acts as a discount price where it will fly to look for a lunging position and the reaction will be born from the first support zone, that is, from this bullish breaker. The position will be based on the interest zone with the aim of updating x,
[12:33] which is perceived by retail traders. where the neckline is stretched, there is a huge pau of liquidity, which is regarded
[12:47] by the masses as a support zone, as a result of which they will actively open a lunging position. I provide liquidity to the market. Now we look at the processing. The price aggressively broke the neckline and tested the breaker, after which, after some
[13:00] time, consolidation began in  the fastest movement and now we are watching the further development of the bullish order fu at this stage you can notice an interesting thing here a bullish head and shoulders pattern has formed where this minimum will act as the left shoulder,
[13:14] where this minimum will act as the left shoulder, and the current minimum that the Turk will act as the right shoulder that such a pattern has formed taking into account the context really has the right to be considered if you open a
[13:27] position based on Nibulon this will not be a mistake it will be a quality trade now we are considering further development the price moved quite slowly in an upward direction but the position we opened would have been closed
[13:40] apotheke the bear trap was successful and a correct reading of the context the reformation of the pattern could have made it possible to open a quality trade with a risk to reward ratio of 19 and well, traders who are flexible enough in
[13:52] their analysis could open a position on the bullish head and shoulders pattern I have shown quite interesting examples and I think that you will come across them more than once a bar note will be this: perhaps some of you will perceive my words as if the
[14:06] head and shoulders will never work but this is wrong my main message is that  I suggest looking at classic cartridges from a completely different perspective because that's how they work most often.
[14:18] If you take the standard variation used by the crowd, then in addition to the template itself, you must determine the context in which it was formed in order to open a quality position. If you learned something new in this video and you
[14:31] comment because it will greatly help promote this video. And also, don't forget to subscribe to my Telegram channel ( to subscribe to my Telegram channel ( link in the description). Good luck.