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Larn the Quasimodo trading strategy to observe profitable trend reversal opportunities. Throughout this trading guide, yous'll acquire what is Quasimodo design trading, how to spot this reversal setup, what are the similarities between Quasimodo trading and Caput and Shoulder trading, and, final but not to the lowest degree, we're going to take a deep swoop into how to create a winning trading strategy.

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Trading is not an easy game, but with the Quasimodo trading setup you can proceeds some valuable insight into that market sentiment, more precisely, you will know in accelerate when the trend is about to reverse. Past existence able to stay alee of the market, you can increase the accurateness of your trading strategy and improve your expected return on investment (ROI).

This article talks about reversals in more depth: Trend Reversals in Forex and How to Anticipate Them.

If this sounds interesting, let'due south start with explaining what is Quasimodo.

What is Quasimodo?

Quasimodo is a reversal trading design that appears at the cease of an uptrend. As a cost formation, the Quasimodo design is depicted by three peaks and 2 valleys, where:

1. First, the middle peak is the highest, while the outside two peaks are of the same height.
2. And secondly, the second valley is lower than the first one.

Note* Some technicians might call this reversal pattern the "Over and Nether" nautical chart pattern.

The effigy below outlines the Quasimodo chart blueprint:

Quasimodo pattern in forex trading predicts a bullish-to-bearish tendency reversal.

Based on the analogy of market place sentiment we tin can distinguish two types of Quasimodo patterns:

• Bullish Quasimodo, which appears at the finish of a downtrend.
• Bearish Quasimodo, which appears at the finish of an uptrend.

Now, you might exist inclined to believe that the Quasimodo blueprint looks like to the Head and Shoulder trading pattern.

You're not mistaken as the 2 trading chart patterns are related simply at the same time, they are distinguished cost formations.

Beneath, we're going to expand on the differences between Quasimodo trading vs. Head and Shoulder trading.

Differences between Quasimodo and Head and Shoulder

There are ii major differences between the Quasimodo blueprint trading and Head and Shoulder trading:

• The valleys have different cost structures – aka the depth of the valleys accept no symmetry with the Quasimodo pattern.
• And, the two reversal patterns use two different entry techniques.

The main departure betwixt the Quasimodo blueprint and the Head and Shoulder pattern is the left leg (second valley) of Quasimodo is much lower than the correct leg (get-go valley). With the Caput and Shoulder pattern, both valleys are more or less of the same calibration.

The Quasimodo toll structure doesn't stand out compared to the HS pattern.

That'south where the Quasimodo name is derived from – aka the "malformed" second valley, which depicts a kleptomaniacal Caput and Shoulder pattern.

In this regard, it's not going to be that easy to identify with your naked heart the Quasimodo forex chart pattern. Instead, y'all'll need to use advanced trading indicators.

The second major deviation betwixt the two reversal patterns is the signal of entry.

Usually, the point of entry for the HS pattern is the intermission of the neckline, but with the Quasimodo design, nosotros put an entry order nearly the left shoulder.

Basically, Quasimodo is an avant-garde pattern of Caput and Shoulder.

A key question that is asked by many traders is how we determine when to merchandise the Quasimodo chart setup?

When to Trade  Quasimodo Trading Setup?

The best time to trade the Quasimodo pattern is after a pregnant rally or sell-off no matter the fourth dimension frame used. All chart patterns are fractal in nature meaning they generally appear in various forms in different time frames from the daily chart downward to the 1-minute chart. This is great news for traders who trade beyond multiple fourth dimension frames.

The being of the prevailing trend gives us the opportunity to either catch an entirely new trend or at least we get the chance to profit from a temporary retracement.

Additionally, the Quasimodo chart blueprint allows for amend entry points, which is in contrast with trend trading where the entry signals are delayed. But, as you lot might know, each trading style has its pros and cons.

Now, permit's see how Quasimodo pattern trading works.

How Quasimodo Design Trading Works?

The Quasimodo pattern works based on the imbalance between the supply and demand forces.

Or, in other words, the Quasimodo chart pattern tracks the shift in the toll construction.

Market construction is the continuous serial of higher highs and higher depression producing higher peaks and troughs. When we take a break of structure, meaning a suspension of the ongoing HH and HL, the cost starts offset to print a lower depression.

The Quasimodo trading strategy provides us with a proper framework to interpret the constant ebbs and flows of whatsoever asset (currency, cryptocurrency, stocks, article, etc.).

The surly Quasimodo pattern is in short concerned with how the market comes from a buying momentum and heads towards the selling momentum.

The Quasimodo chart blueprint starts to get visible only once the cost fails to make another higher low (HL).

For some novice traders, this type of information might be enlightening because now you lot can have a proper framework to analyze the cost structure. Yous take to go on in mind that this is one arroyo to view the markets and by no ways the just one.

Now that things are starting to become clearer, we're good to define the Quasimodo pattern trading rules

Quasimodo Design Trading Rules

The Quasimodo trading rules for sell signals can exist summarized as follow:

1. A prevailing uptrend needs to be visible – series of HH followed past a serial of HL.
2. Intermission in the market structure – price first to make lower lows LL.
3. Place a sell order near the right shoulder.
4. Hide the protective stop-loss above the last college high HH.
5. Take profit near the first valley of the Quasimodo chart blueprint.

Equally a general dominion, the Quasimodo pattern carries more weight if the second valley is much lower than the outset valley. In other words, the bigger the distance betwixt the two valleys, the more kleptomaniacal the Quasimodo pattern becomes.

The forex chart below outlines a bearish QM pattern on the 1-60 minutes timeframe:

Next…

Let's take a look at the bullish Quasimodo reversal pattern.

The Quasimodo trading rules for buy signals can be summarized every bit follow:

1. A prevailing downtrend needs to be visible – serial of LL followed by a series of LH.
2. Break in the market structure – price start to make college high HH.
3. Place a buy order near the right shoulder.
4. Hide the protective finish-loss strategy below the final lower low LL.
5. Have profit most the offset elevation of the Quasimodo chart blueprint.

The forex chart beneath outlines a bullish QM pattern on the USD/JPY 1 hour timeframe:

Now let me share with yous a simple but effective trading pull a fast one on.

If yous want to test how crooked the Quasimodo chart pattern is, simply draw some lines along with the price construction. When you practice this, the Quasimodo price structure will pop up on your toll chart.

When you highlight the toll structure (as in the USD/JPY trade instance) we tin can clearly see the crookedness of Quasimodo.

In the USD/JPY example, we tin see the price structure is not that crooked, it looks more like the Head and Shoulder design.

Thus, in this particular trade, the market didn't give us the chance to enter a buy club.

And that's the matter with the Quasimodo pattern trading, meaning lots of missed opportunities.

To go around this pitfall that is common with all chart patterns, we're going to add some confluence to the Quasimodo pattern and twist the rules.

Below, we're going to outline an avant-garde Quasimodo trading strategy:

Quasimodo Trading Strategy

You don't have to add complicated stuff to make a simple chart design give more accurate trade signals. The but actress tool we demand to optimize the Quasimodo trading strategy is the Fibonacci retracement indicator.

Now, if yous're a fan of the Fibonacci retracement tool, you might want to cheque this new Fibonacci Trend Line Trading Strategy.

The Fibonacci retracement indicator can assist us anticipate where the final price swing that is function of the Quasimodo chart pattern might end. If you backtest this pattern, you lot'll meet a lot of missed trading opportunities because the terminal swing wave of the Quasimodo pattern doesn't always stretch nigh the left shoulder. If you demand to learn the all-time backtest strategy cheque out our blog!

The Fibonacci retracement levels tin assist usa identify reliable price zones of back up and resistance. Nosotros're specially interested in the price zone between the 50% Fibonacci retracement and 61.8%, with the sweet spot beingness the 61.8% Fibonacci retracement level.

Now, let'south go back with our missed trade on the USD/JPY chart.

Past applying the new rules of the Quasimodo trading strategy, we're able to capture a total-blown reversal.

See the nautical chart beneath:

The USD/JPY establish back up right between the 50% Fibonacci retracement and the golden ratio.

Another fundamental indicate to take into consideration when y'all trade the Quasimodo design is the quality of the swing highs and lows.

We demand to find a mechanical approach to quantify the quality of the swing highs and swing low points.

As a full general rule, we consider a qualified swing high (swing low) only those points that have a Five-shaped pattern. These price formations are also known every bit 5 tops and 5 bottoms.

A V-shaped swing low can exist hands recognized by the cost sharply switching from bearish to bullish respectively from bullish to bearish.

If we examine the price structure of the same USD/JPY chart and the Quasimodo chart pattern, we can observe that every single swing loftier and swing low role of the Quasimodo pattern is V-shaped.

Meet the forex nautical chart beneath:

The main point to take is that when the Quasimodo cost structure is Five-shaped, you can bet your house on information technology.

Final Words – Quasimodo Pattern Trading

In summary, Quasimodo pattern trading is a new technique used to grab tendency reversals. Don't be afraid to give it a try just because it'due south a new nautical chart blueprint. When all the elements of this reversal blueprint come up together, you take a receipt for success. With our Quasimodo trading strategy, you now have a proper framework to tame the loftier volatile forex market.

So, here is a quick summary of what you've learned today:

• Quasimodo nautical chart blueprint is a reversal pattern.
• Quasimodo trading is not similar to Head and Shoulder trading.
• Quantify the crookedness of Quasimodo by drawing a visual line on the price chart.
• 5-shaped price structure of the Quasimodo blueprint produces more profitable signals.
• The 50% - 61.viii% Fibonacci retracement zone is a better entry technique.

Give thanks yous for reading!

Be certain to acquire near mean reversion trading strategies, also.

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