A trader’s main task is to analyse the situation in the market and open transactions in accordance with the presumptions. These assumptions should be supported by some means such as indicators or patterns. And here we propose you learn what is and how to use the Quasimodo trading strategy.
- 1 Identifying the Quasimodo pattern on the Olymp Trade platform
- 2 Trading with the Quasimodo pattern on Olymp Trade
- 3 Conclusion
Identifying the Quasimodo pattern on the Olymp Trade platform
You should look for the Quasimodo pattern at the end of the trend. This is a reversal pattern so you should expect the price to take the opposite direction after its appearance.
The Quasimodo pattern may appear during the uptrend and then it will foretell the fall in the prices or during the downtrend and then it is a sign of a rise in the prices.
What does the Quasimodo look like?
The pattern which might be found at the end of the uptrend is formed by three peaks and two valleys. But it is important that the central peak is the highest of all. Two surrounding peaks have the same height. As for the valleys, the second must be deeper than the first one.
The Quasimodo at the end of the downtrend, on the other hand, will be created by three troughs, where the middle one is the lowest and the outside ones are at the same level, and two peaks, where the second one is higher than the first one.
Quasimodo versus Head and Shoulder
When you look at the Quasimodo chart pattern, does it resemble the Head and Shoulders pattern? It may and they are both reversal patterns, however, there are some basic differences between them. The main distinction is that the valleys in the Quasimodo are not at the same level while in the Head and Shoulders they are. The second difference is in the use of the patterns. With Head and Shoulders, traders usually enter their positions when the neckline is being broken. The Quasimodo chart pattern offers a diverse approach.
Trading with the Quasimodo pattern on Olymp Trade
The market form higher highs and higher lows during the uptrend and lower highs and lower lows during the downtrend. When this rule fails, that is the lower low appears (or the higher high in the case of the downtrend), the Quasimodo may be visible.
When is a good time to open a sell trade?
You would like to open a sell trade when the market reverses from the uptrend. It means there should be higher highs and higher lows observed on the price chart. Then, you should note the break in such a structure and see how the lower low is created. You should enter at the level of the right shoulder.
The stop loss can be placed over the last HH (higher high) level and the take profit at the level of the first valley in the pattern.
A signal is stronger when the difference in the height of two valleys in the pattern is more significant.
When to go long?
First, a downtrend must be identified which means you should check whether lower lows and lower highs are made by the price. Then, wait for the break in this structure that is when the first higher high is formed. You should enter your long position around the right shoulder of the Quasimodo pattern.
A stop loss can be set at the last lower low and the take profit at the first peak in the pattern.
Upgrading the Quasimodo trading strategy
Sometimes, the pattern will not be fulfilled and the opportunities can be missed. To get more accurate signals you may upgrade the Quasimodo strategy by adding the Fibonacci retracement indicator.
The Fibonacci retracement levels are of great help in identifying key support and resistance levels. Especially the zone between 50% and 61.8% Fibonacci retracements are important for us.
With this indicator applied you may try to predict where the final price swing of the Quasimodo pattern might end.
One more valuable point to highlight is that the swing highs and lows in the pattern should be V-shaped. This ensures the movement of the price is sharp.
The Quasimodo pattern may be used for any asset and in various time frames, from the 1-minute charts up to daily ones. It helps to catch the trend reversals. You may notice it at the end of the uptrend as well as the downtrend.
In its essence, the Quasimodo Pattern is very similar to the Head and Shoulders pattern. The difference in the appearance of the pattern is very subtle but distinct enough so that the Quasimodo Pattern allows you to get into position earlier and at a better price.
Before you start using this pattern, look for it on charts of different assets and time frames. By training in this way, you will accustom your eyesight and you will be able to more easily identify the desired sequences of peaks and troughs on the chart.
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