Skip to main content

Head And Shoulders Pattern Risk Management

Effective risk management is the cornerstone of successful trading. Our head and shoulders pattern indicator includes advanced risk management tools to help protect your capital and maximize returns.

Core Risk Management Principles​

1. Trading Plan Development​

A robust trading plan should include:

  • Clear entry and exit rules
  • Position sizing guidelines
  • Risk per trade limits
  • Pattern validation criteria
  • Market condition filters

2. Risk Assessment Framework​

Evaluate each trade setup based on:

  • Pattern quality and clarity
  • Volume confirmation
  • Market context
  • Support/resistance levels
  • Volatility conditions

3. Position Sizing​

Risk Management Settings

Our indicator automates position sizing calculations:

  1. Account Settings:

    • Enter your account size
    • Set risk percentage per trade
    • Define maximum position size

  2. Risk Calculation:

    • Based on account balance
    • Considers stop loss distance
    • Adjusts for market volatility
Pro Tip

Start with 1% risk per trade and adjust based on your risk tolerance and trading experience.

Stop Loss Strategy​

Placement Guidelines​

Optimal stop loss levels are automatically calculated:

  1. Bearish Patterns:

    • Primary: Above right shoulder
    • Alternative: Above head (aggressive)
    • Trailing: Based on ATR

  2. Bullish Patterns:

    • Primary: Below right shoulder
    • Alternative: Below head (aggressive)
    • Trailing: Based on ATR

Risk/Reward Optimization​

The indicator provides three take-profit levels:

  • TP1: 1:1.5 risk/reward ratio
  • TP2: 1:2 risk/reward ratio
  • TP3: 1:3 risk/reward ratio

Risk-Reward Ratio Example

FAQ​

How do I determine the right position size?​

Use our automated position sizing calculator by entering your account size and desired risk percentage. The indicator will calculate the optimal position size based on the pattern's stop loss distance.

We recommend risking no more than 1-2% of your account per trade. New traders should start with 0.5% until they develop consistency. Learn more in our statistics section.

How does the trailing stop feature work?​

The trailing stop adjusts automatically based on ATR (Average True Range) to protect profits while allowing trades room to breathe. See our usage guide for detailed settings.

Next Steps​

Advanced Trading Strategies

Learn to combine risk management with advanced trading techniques

Performance Statistics

Analyze historical performance data to optimize your risk management