The Only Chart Pattern Trading Video You Will Ever Need... (New Strategies Included)

"now later in the video I am going to go over my exact rules for chart patterns we just talked about the mistake and what you need to do to avoid it which is make rules later in the video when we fix the mistakes which is my plan for later on I'm actually going to give you my exact rules for double bottoms double tops Head and Shoulder patterns and inverse Head and Shoulder patterns but before that I want to make it all the way through the mistakes first so mistake number two is trading chart patterns in the middle of nowhere"

"I'm actually going to give you my exact rules for double bottoms double tops Head and Shoulder patterns and inverse Head and Shoulder patterns"

"my rule for these is that I make a box from the lowest body of the Swing Low to the lowest low of the Swing Low we'll do that with horizontal lines to make it easier to see so that would look like this right here this would be the zone that I want price to test but not close below"

"I want Market to stop before this low but I want it to at least test the lowest body of the swing low so this is what that looks like with real candles if I click forward a bit you'll see that we now have a test of our first bottom bottom excuse me giving us a double bottom but we don't have any candles that are closing below our Wick"

"if you wanted to create a rule you could say that you need to see between five and let's say 25 candles but between your first bottom and your second bottom"

"my area is going to be from the top of the bodies of the Swing High to the very high of the wick of the Swing high and that looks like this top of the bodies top of the wick we now have a Zone where I want to see price touch and test and be rejected from"

"what I don't want to see is Trend continuation I don't want the market coming up here and then creating a candle that closes Above This high of the double top"

"my rule number one is met which is a test of the bottom of the previous shoulder so that would be this zone right here which did get tested right here my next rules are that since we already have that one done and I'll just leave that here in case I need to do another example my next rules are that I want to see price come up at least to the right shoulder but price cannot touch the head of the pattern"

"the termination zone for what is considered our left shoulder so at this point we know we can see price or we must see price at least touch 129.5 because that's the highest bodies of our right shoulder we know that price cannot touch the highest bodies of the head of our pattern as long as that happens and we see a push lower we have a valid Head and Shoulders pattern"

"we need a break through the neckline Zone in order to classify this as a valid head and shoulder pattern"

"we want to see price push up and at least touch this area but what we don't want to see is price push up higher and end up creating a higher high right here in price compared to the previous High over here"

"we then have a pull back and touch between the lowest body of our first shoulder and it cannot touch the head of our pattern being the lowest body of the head of that pattern"

"we then have a break of our neckline Zone this is all turning into a valid Head and Shoulders pattern"

"what c e s stands for and I know what you're thinking I have great handwriting is Conditions entries stops and targets so when you're thinking about building rules around a full strategy not just around chart patterns right when you think about building rules around a full strategy by adding these fluences you want to have rules for the conditions before you look for your actual entry you want to have rules for why do you press the buy or sell button what is your exact entry you want to have rules for where is your stop loss going to go and ideally you want to have rules for a Target but there are some Traders including myself at times that do subjective targets which you can do once you become more experienced but in a nutshell what you want to make sure is that you have rules for conditions entries stops and targets"

"one of my favorite ways to trade these chart patterns as reversals is by simply adding an RSI indicator and using this RSI indicator as my signal that we're ready to reverse and what I mean by that is when the RSI is oversold it's telling you that the price of an asset has been pushing down for a while we know that what goes up must come down and in the same way with financial markets what goes down eventually will go back up as well at least for the most part and with that being the case what we're looking for now is going to be these same price patterns these same chart patterns you've learned the rules to already to happen when markets get oversold"

"our entry specifically was the breakout of the neckline of the head and shoulder pattern and very specifically was the breaking close below the lowest body of that neckline"

"for me let's go 20 Pips above the entry candle that'd be about 81 Pips and for targets I personally normally go for about a 1.4 to one with my first targets"

"our entry was a close above the highest body of the neckline of this pattern which is right here if we look at this neckline in total we have bodies of candles right here for the neckline and the highest bodies of the neckline is actually the next neckline part of this pattern which is right here so with this being the case we have an entry on this candle the close of this big green candle"

"we're using a 20 pip stop loss below the low 62 that would be an 82 pip stop and for those of you going how did he get 62 62 is to the bottom of this candle and I'm adding 20 Pips next up we're looking for targets what did I say before we're going to do a 1.4 reward to risk ratio for these examples"

"for an entry on this specific pattern for this specific strategy what we're going to look for is a candle close above the top of the neckline the bodies of the top of the neckline"

"we will go 20 Pips below our entry candle the entry candle is right here so we will have a stop loss at 14 + 20 which is going to be 34 Pips and we will have a 1.4 to1 reward to risk ratio"

"we're going to wait for a candle to close below the body of that neckline so this is going to be our entry right now"

"we would have a short entry right there we would have 20 Pips above our entry candle which would be 44 Pips we have 24 to the top of that candle so it' be 44 as the total stop loss we would then have a 1.4 to one reward to risk ratio"

"the only thing we need to add to the chart is a 200 period EMA or exponential moving average that's all this black line is and that is going to be our Trend filter"

"for Trend continuation chart patterns I'm going to be putting the stop loss below the previous low of this double bottom so this is what that would look like I'm still going to be looking for a 1.4 to1 reward to risk ratio for these examples but I do want to put a stop loss instead of being below my entry candle like we were doing on reversals below the neck uh neckline I keep saying that below the bottom of this double bottom"

"my stop loss would go above the most recent shoulder since we have that in place we can now set a target for me yet again 1.4 to1 reward to risk ratio"

"my stop loss would go below the most recent shoulder which is right here and then I would also still have my 1.4 to1 reward to risk"

"my stop loss for this specific pattern would be above the most recent shoulder"