This is one question by one of our fellow traders
Hello guys. On the daily of gbp/usd,there is a clear head and shoulder formation. It broke through the neckline and looks bearish for now. What puzzles me is how do you forecast the downwards price from the difference of the high between the top candle and neckline.
Which top candle do you take for your calculation and do you take the high of that candle or the pivot point?
I bet this question comes from one of my forex trading signal talking about the head and shoulder formation. In fact, I have written a blog post on May talking about the head and shoulder formation. In the post, you can see which candle I take as the high candle and how I do the price projection.
Read the head and shoulder pattern post here
Do note that the head and shoulder candlestick pattern is a reversal candlestick pattern and you should only enter your trade when the price manages to successfully break the neckline.
A top head and shoulder pattern looks like alphabet M while the bottom head and shoulder looks like alphabet W. They are very useful when you see them in a strong trend as this usually mark the exhaustion of a trend.
I hope that I have helped to solve your question and all the best to your trading.
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