Skip to main content

Risk Management

When trading the Head and Shoulders pattern, proper risk management is essential for successful trading. Here are the key aspects to consider:

Position Sizing​

The indicator calculates the optimal position size based on:

  • Your account balance
  • Your account risk percentage
  • The distance between entry and stop loss

Just go to the settings of the indicator and scroll down to the section "Risk Management".

Here you can enter your Account Size and how much of it you want to Risk when opening a position after a pattern breakout.

Risk Management

Risk/Reward Ratio​

The pattern provides three take-profit levels (TP1, TP2, TP3), with the risk/reward ratio (R) calculated based on TP1. This helps ensure that each trade has a favorable risk-to-reward setup.

Stop Loss Placement​

The indicator automatically calculates the optimal stop loss level (SL) based on the pattern structure. This is typically placed:

  • For bearish patterns: Above the right shoulder
  • For bullish patterns: Below the right shoulder