"Since the beginnings of technical analysis, classical technical patterns have been repeating over and over in all time frames and in all markets.
It’s interesting that these patterns have not changed in centuries. They are truly a reflection of crowd psychology.
Many times you will see the structures of the patterns form with exact Fibonacci ratios. Adding the Fibonacci ratios to these patterns will give the trader an additional tool for timing entries and controlling risk."
I completely agree and just posted an AUDNZD chart trading a harmonic pattern within a larger Head and Shoulders pattern, although some people trade H&S differently and put the stop above or below the right shoulder... not that I trade them as a classic pattern
The problem with classical technical analysis including H&S, majority of triangles etc is that they have you buying or selling after the price has already moved a lot and trying to overcome a level of resistance - which is expecting MORE buying or sellers to come in (from somewhere?) to push it through the support or resistance level/ trendline or whatever...
This does a few things...which are not ideal namely, a) it decreases the probability of the pattern working by buying or selling at a resistance or support zone b) It decreases your potential reward:risk by waiting for a 'confirmation' and c) Increases your risk
There have been studies that disprove H&S patterns, despite what Bulkowskis book says re reliability, from my experience it is better to try and trade the harmonics within the patterns trying to pinpoint the turning points within it, knowing that 1) your risk is smaller 2) your potential reward to risk is higher 3) you have far more opportunities than trading just the H&S itself
Harmonics are designed to take advantage of corrective phases in the market, H&S patterns are just the 'supposed' completions of that corrective phase represented by sideways price action/ consolidation..
The problem with classical technical analysis including H&S, majority of triangles etc is that they have you buying or selling after the price has already moved a lot and trying to overcome a level of resistance - which is expecting MORE buying or sellers to come in (from somewhere?) to push it through the support or resistance level/ trendline or whatever...
This does a few things...which are not ideal namely, a) it decreases the probability of the pattern working by buying or selling at a resistance or support zone b) It decreases your potential reward:risk by waiting for a 'confirmation' and c) Increases your risk
There have been studies that disprove H&S patterns, despite what Bulkowskis book says re reliability, from my experience it is better to try and trade the harmonics within the patterns trying to pinpoint the turning points within it, knowing that 1) your risk is smaller 2) your potential reward to risk is higher 3) you have far more opportunities than trading just the H&S itself
Harmonics are designed to take advantage of corrective phases in the market, H&S patterns are just the 'supposed' completions of that corrective phase represented by sideways price action/ consolidation..