Discussing the article: "Automating Trading Strategies in MQL5 (Part 13): Building a Head and Shoulders Trading Algorithm"
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Check out the new article: Automating Trading Strategies in MQL5 (Part 13): Building a Head and Shoulders Trading Algorithm.
In this article, we automate the Head and Shoulders pattern in MQL5. We analyze its architecture, implement an EA to detect and trade it, and backtest the results. The process reveals a practical trading algorithm with room for refinement
The Head and Shoulders pattern is a classic chart formation widely recognized in technical analysis for predicting trend reversals, appearing in both standard (bearish) and inverse (bullish) variations, each defined by a unique sequence of price peaks or troughs. In the standard pattern, in our program, an uptrend will give way to three peaks: the left shoulder will establish a high, the head will tower distinctly higher as the trend’s climax (surpassing both shoulders significantly), and the right shoulder will form lower than the head yet close in height to the left, all tied together by a neckline linking the two troughs—once price breaks below this line, we’ll enter a bearish trade at the breakout, set a stop-loss above the right shoulder, and target a take-profit by projecting the head-to-neckline height downward as illustrated below.
Author: Allan Munene Mutiiria