HEAD AND SHOULDERS & INVERSE HEAD AND SHOULDERS PATTERN - 10% to @Tron-Fan-Cub

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Hello everyone and welcome to my blog.

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Cryptocurrency is no new thing in our world today as it had grown to be very common even amongst newbies in the world of cryptocurrency. Here on Steemit we are familiar with the term and a good number of us are traders while most persons are aspiring to become one in the nearest future.

In trading, a lot of strategies are used in spotting out trend reversals which the most common ones being the interpretation of osscilators specially the RSI and the Stochastic indicator. These indicators are used in mostly identying when an asset is either oversold or overbought which in turn signals a possible trend reversal.

Here we will be looking at trend reversals using the head and shoulders pattern and inverse head and shoulders pattern.

These two strategies I believe to be one of the most accurate method of identying trend reversals in the market.

HEAD AND SHOULDER PATTERN

The head-and-shoulder pattern is a bullish-to-bearish reversal pattern which shows that buyers are currently being exhausted and the market strength is currently being passed to sellers who are eager to reverse the price.

It stars with the forming of the first high which is regarded as the left shoulder, after which another high is formed which goes higher than the previous high and thus high is regarded as the head. After the complete formation of the head, another high is formed which goes below the previous high but the same or almost the same with the first high (left shoulder) and this high is regarded as the right shoulder.

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ANALYSIS USING HEAD AND SHOULDERS PATTERN

In other to find an entry using the head and shoulders pattern, we will have to first wait for the complete forming of the head and shoulders. After the formation of the right shoulder, we will draw a neckline which is done by joining the base of the left shoulder with the right one.

After drawing the nextline, we will wait for a breakout and once the breakout candle close under the neckline, we will make our sell entry.

• See below

_{Screenshot from MT5}

From the above we will see that all conditions were met before an entry was made and in other to find more confluence an RSI Indicator was added and the breakout below the neckline corresponded with the move of the RSI below its mid-point thus indicating a continuous downtrend.

THE INVERSE HEAD AND SHOULDER PATTERN

The inverse head and shoulders pattern is a reversal pattern similar to the head and shoulders pattern but opposite. It signals a possible bearish-to-bullish trend reversal by showing the weakness of sellers through the formation of the first low which is referred to as the left shoulder after which another low which is lower than the first low is formed and this low is referred to as the head. After the formation of the head, another low is formed but this time it is not as low as the preceeding low but almost the same height with the left shoulder and this low is referred to as the right shoulder.

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ANALYSIS USING INVERSE HEAD AND SHOULDERS PATTERN
Analysis using inverse header and shoulders pattern is done similar to the head and shoulders pattern where by we will have to wait for the complete formation of the inverse head and shoulders after which we draw a neckline and then wait for a breakout above the neckline before taking a buy position.

• See below

_{Screenshot from MT5}

From the above we will see that we waited for all the conditions to be met before making and entry and for confluence sake, an RSI Indicator was added and it was found to be above the point 50 during the breakout point which indicates and uptrend.

CONCLUSION

Cryptocurrency trading is really profitable and at the same time risky. Due to its risky nature a lot of strategies have been developed in other to properly interpret market activities going on between buyers sellers and that was what has brought about the head and shoulders pattern and the inverse head and shoulders pattern which serves as a proper reversal pattern for traders.

In as much as the head and shoulders and the inverse head snf shoulders pattern are effective in spotting reversals in the market, it is wise to always combine it with other tenchincal analysis tools such as the RSI which will help to provide confluence thus increasing the chances of a profitable trade.

Thanks for reading..
I hope you learnt something.