H&S Trade Diary: 1-1
Second trade for the Head and Shoulders strategy was a loser: USDJPY – 1.8% / 120 Pips
This trade took a bit longer to play out than our first trade. I was watching this Head and Shoulders pattern brewing on the 4 hour chart through the beginning of March:
The neckline was a little noisy, but we got a clean break at 12 PM Tuesday 8th. The initial breakout candle closed substantially below the neckline, so I waited just over 20 minutes and managed to short the spike at 113.10:
The trade looked quite good at first. Price declined nearly 90 pips, but eventually reversed and our 120 pip stop was hit late on Thursday night.
If I was trading discretionary, chances are I would have taken profit on this trade (or at least moved stop to breakeven) … but our strategy rules are clear: Stop loss above the right shoulder, 1:1 break even trail and 1.5x take profit target. Will reassess these rules at conclusion of the experiment.
Points Of Interest:
Once again our stop could have been a lot tighter – trade only moved 15 pips against entry point (stop was 120 pips). This was also the case on our first trade and there may well be a pattern here. A stop loss level well below the right shoulder may be more appropriate – If our stop on this trade was only 50-60 pips, this would have been another successful trade.
Missed another set up while holding this trade. Considering high probability of H&S patterns, may be worth allowing two simultaneous trades (total risk 4%).
Considering low trade frequency, may have to test strategy for more than one month.
OG H&S: 1
Two trades down and the score’s one all … but our account’s still profitable! Great example of the benefits of trading with a positive risk to reward ratio. Tune in for the next trade.
Oscar Goullet – @FXtechs
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