Multiple false signals??? Where?

The Hound of Baskervilles is no false signal, it's another pattern. Wait till the neckline is broken, then you have your signal. On higher tfs it's clearer to recognize. I also wouldn't say overfitted. In a channel you have more SHS and double tops/bottoms - that can happen. It all depends on your trading style. For scalper they are excellent and you go from the bottom to the ceiling and back. You make here even more money as in a trend. But you also see the trend beginning when the channel is broken. So you can trade both. Mostly more SHS show in the direction of the new trend. I mean, when you know what a channel is for money makers that just makes sense. Trend follower have to wait a bit more maybe, but they are warned early. I every case you need some exercise first.

As I said, it's one part of the predicting game and I mean reading the market. Guessing is when you don't know what you do. Here you're right, that leads to account drawdown. We don't want to guess at all and be the paymaster, right?

So we have to exercise first - as everything if you want to be good in it. Trading is simple, not easy. Trading is art with some math. This here belongs to the art part.

Please do some practice before you go out hunting. They are everywhere on all pairs and tfs and if you miss one, the next won't wait long time. See the next example from the January in 2016.

 
This is SHS with one head and two shoulders. The neckline touches all valleys between shoulders and head. Unless it is the case, be careful, it isn't a SHS or non-barking hound. The next pic shows the same pair and time window, but a wrong pattern.

 
When you missed the SHS pattern, there was another smaller SHS and a hound following. See where at the second shoulder of the hound (green) the three hammer candles hammering out the bottom. The three hammers at the same spot and an old sup/res are a very strong sign that the market don't want to go down and instead the market will go up the next time. What follows is an impulse up.

 

Putting it together we have a pack of SHS and hounds (green and red pattern) and this corrections formed the second half of EW3 and the down move after dark blue SHS as EW4. What we also see is that it can quickly get messy on the chart. An advanced or naked trader just draws a colored neckline or some other short sign to keep the chart clean for more PA analysis.


Have fun.

Krelian99 wrote:Please do some practice before you go out hunting.

Tobi
Pretty thanks for well explained patterns,it help us traders to have price movement idea in all and every situation
regards

Is there a good reversal pattern indicator ?

I really don't know and I wouldn't use any. When the SHS is finished there is a immediate impulse wave. Indis would come too late. Many people and indicators use S/R or TL based on Bill William's fractals, what is very bad. I only can repeat 'Do manual what you can.' and it isn't difficult at all. 

 

The same picture a bit zoomed out on the M15. Naked trading is reading or listen the market.

Not random, no math, no casino, just a few lines that helps avoid you getting into weak positions. 

Greetings,
They are useful in case they are recognized on time as they might help to show the market direction.Me personally, I do not trade them like "by book", but once they are confirmed, the short term trades in line with model direction is profitable

The big orange SHS is confirmed and the small green one is still merging. Maybe there will be a second right shoulder, but then it goes down.

A nice pack of SHSs seen yesterday on CADJPY M5 and M1. If you have seen it but the Double Top or a distribution channel, where price rotated between ceiling and bottom it is absolutely ok. Important is that you know how to trade your favorite reversal pattern(s). A guy told me he trades only perfect SHSs like out of an education book. The point is that too perfect patterns are identified by too many traders and these patterns don't really run. On this chart isn't one perfect SHS, they all are strange, mutants with three heads or whatever or the neckline flips to the wrong side (the second one on M5), BUT they all ran and this partly very well.