The video game industry is currently navigating through troubled times. On paper, revenue is higher than it has ever been, with video games often challenging Hollywood in terms of cash generation. Unfortunately, under the surface, there are deep structural problems that may soon force an industry-wide reset. Ubisoft held its initial public offering on the Paris Stock Exchange back in July 1996 for around €2.30 per share. 22 years later, in July 2018, Ubisoft broke above €100 for the first time. Then the music stopped. Project cancellations, repeated financial failures and poor management caused the stock to haemorrhage over subsequent years, with astonishingly little relief on the way down. As of the time of writing, Ubisoft (UBI) is trading for €5 per share. IPO buyers are up 2X in 30 years. July 2018 also marked the local top for Electronic Arts (EA), which established a record intra-day high of $151 per share. Stock in the company fell sharply after disappointing Battlefield V sales, then flat-lined for about five years. EA currently trades for $200 per share. Top buyers have seen a laughable 33% gain in 8 years. Embracer Group (formerly Nordic Games and THQ Nordic) plummeted 95% between May 2021 and March 2026 after it became apparent that the company had amassed unsurmountable debts. Embracer still owns the rights to some huge IPs, including Lord of the Rings and Tomb Raider, but faith in the company remains shaken. The list goes on. Roblox (RBLX) has fallen 65% since last October. CD Project Red fell 84% following the disastrous release of Cyberpunk 2077 and is still 40% down from its 2020 high today. GameStop (GME) deserves its own article, but remains 80% down from its short-squeeze high of $120 five years ago. The cooldown in the video game industry also affected adjacent sectors. Unity Software (U), the software development company responsible for the Unity Engine, hit a record daily close of $201 per share in November 2021, before undergoing a brutal 93% correction. Earlier this year, Unity suffered the additional hit of the dreaded AI fear trade after Google released Project Genie, a tool capable of generating 3D worlds from text inputs. It now trades for $25. Japan has the same problem. Sony surpassed $30 per share in March 2000, it currently trades for $22. Nintendo first broke ¥7,000 per share back in November 2007. Following a drastic 50% collapse over the last six months, it now trades for the same price. Unfortunately, shareholders are not the only victims. According to some estimates, the video game industry has laid off 50,000 people over the last three years. The COVID lockdowns provided a lift to video games, because no one had anything better to do, leading companies to rapidly take on additional staff to accommodate the growing demand. Unfortunately, the boost proved to be short-lived, leading to an equally rapid reduction in payroll counts. According to the 2026 state of the game industry report, a quarter of all survey respondents were laid of over the last two years. In the case of US workers, this figure rose to a third. It is worth repeating: one third of all workers reported losing their job. An insane statistic. The ongoing firing spree has been absolutely brutal, leaving thousands of people without a job. Design departments have been among the hardest hit, as have quality assurance and testing teams. HR and marketing departments also felt the pinch as they were simply no longer necessary given the general downsizing observed in many companies. For those paying attention, the decline is nothing new. Video games were already showing worrying signs throughout much of the 2010s. Ballooning budgets became unsustainable and the old model of game development began to meet a number of insurmountable challenges. The industry is now reaping the consequences. The problem is with game development itself. Studios used to be able churn out major franchise titles year after year, granting companies a far greater degree of flexibility than they benefit from today. It seems unthinkable in the modern landscape, but Squaresoft published four Final Fantasy titles between 1997 and 2001. Capcom released four Resident Evil titles between 1996 and 2000. Eidos developed five Lara Croft games between 1996 and 2000. The first three Gran Turismo titles released within 4 years of each other. Grand Theft Auto, Crash Bandicoot, Spyro, Silent Hill, Tekken, Street Fighter, Tony Hawk’s Pro Skater and many other household names all boasted near yearly releases. The trend continued well into the 2000s with Ratchet and Clank, Jak and Daxter, Zelda, Medal of Honor and Assassin’s Creed, but eventually, development would slow down to a glacial pace. Popular franchises used to push out entire trilogies on one console; now a single game gets spread over three distinct console generations. More powerful consoles were initially welcomed with open arms, but they brought about permanent changes in the way video games were made. With more potent hardware came longer production times, bigger dev teams and inflated budgets. Suddenly there was much more at stake. Writing off a cheap failure is fine; writing off a massive budget, multi-year project is not. The stakes became far higher. The changing economic constraints pushed developers to place safer bets. Out of necessity, the industry moved to the centre to capture the middle 60%, resulting in more homogenised products. If it takes 6 years and hundreds of people to make a video game, no one is going to take a gamble by producing something that does not fit a very narrow mould. Production falls into the trap of committee-driven decisions, box-ticking and an overly cautious approach to development. This is also why every studio seems hell bent on producing remakes. It’s safe. The market research has already been done. People will often spend money based on familiarity alone. Unfortunately, this kind of consumer behaviour only makes things worse, further cornering developers into churning out lazy, generic slop, or keeping decade-old franchises on life-support because they became bloated cash cows. It is a vicious circle. Most of the money is concentrated in a small number of huge IPs, which is where companies, understandably, focus their efforts. This produces fewer and fewer options, leading to further consolidation of the player base. The video game industry is not alone in this. Media in general has rounded off the edges to maximise profit, leading to stagnation in music, television, film and even literature. Crowdfunding cuts straight to the heart of the financial problem. Instead of large companies allocating budgets to projects, small dev teams can advertise what they want to create and individual investors can participate directly. This model has a number of obvious success stories, including Hollow Knight, Pillars of Eternity and in the literary world, Brandon Sanderson’s "Secret Projects", which allowed the author to self-publish. Of course, crowdsourcing has also hosted some truly spectacular failures, such as Chronicles of Elyria, which raised $1.3 million but produced absolutely nothing of value. The studio responsible for the project closed and all staff were laid off, leading to a class action lawsuit that would eventually be dismissed by the courts. This is far from an isolated case. Many teams honestly tried… but honestly failed to deliver on their promises, while others shamelessly vanished without a trace. Artificial Intelligence is seen as the latest panacea for the video game industry, and partly explains the massive layoffs discussed above, but opinions within companies are divided. While a third of respondents in the game industry survey report using generative AI tools, over half of industry professionals think that such tools have a negative impact overall. In particular, almost two-thirds of people working specifically in graphic, design and programming fields hold unfavourable views. There is a clear disconnect between the decision makers at the top who assume AI will replace entire departments overnight and the rank-and-file who actually use such tools as part of their workflow. Once again, the video game industry is far from alone in this. Software development in general has been complaining about overreliance on AI for a while. Programmers are being squeezed for quantity over quality, resulting in large, messy code bases that are increasingly troublesome to maintain. Refactoring has gone out the window, copy-pasted code blocks swell the surface area of attack, vulnerabilities proliferate and programmers spend more and more time correcting mistakes. Suffice to say, AI is not the silver bullet people thought it would be. Video games underwent a huge crash once before, back in the early 1980s. The fallout was bad enough that many people thought the industry was over for good. The reasons for the crash were completely different, as were the resulting solutions, but the fact of the matter is that the video game industry rose from the ashes stronger than ever. The 1983 crash is arguably responsible for Nintendo becoming the giant it is today. From chaos emerges order. If the video game industry does indeed suffer another existential crash, the resulting field will likely emerge in a far healthier state. Signs are already emerging in this regard. Corporate, console-backed circles may be facing hard times, but PC gaming is looking far healthier in comparison. Unfortunately, PC gaming has its own issues, namely ridiculous hardware costs. Component manufacturers are now catering almost exclusively to their AI-focused customers, leaving the gaming market to pay top dollar for what scraps remain. A problem that would resolve itself overnight if the AI trade were to collapse.
Oil prices plummeted early this morning as markets grappled with the very real possibility of an end to hostilities in Iran. The Brent Crude benchmark sank to $97 per barrel as trading got underway in Asia, while WTI fell down to $90. According to reports from both sides, a memorandum of understanding is being finalised between the US and Iran, which would include a 60-day ceasefire extension, a reopening of the Strait of Hormuz and crucially, would see Iran forfeit all stockpiles of enriched uranium, although the details of the last point remain unclear. While the recent development is promising, markets have seen this all before. Peace talks have come and gone over the past few months and so far, every attempt has failed to resolve the ongoing conflict. Nevertheless, according to Iranian sources, some 33 vessels have safely transited the Strait over the last 24 hours, including a number of oil tankers destined for Asia. Precious metals opened with a respectable gap to the upside this morning, pushing gold $50 higher and raising silver to $78 per ounce following disappointing weekly closes for both metals last Friday. Currencies have yet to react too explicitly, with the DXY falling a mere 0.3%. The real winner so far today has been the Nikkei 225 index, which effortlessly surged 3% after the opening bell, smashing through 65,000 points for the first time in its history. It was another record-breaking week for US indices last week, with the Dow, S&P 500 and Nasdaq all establishing new weekly high closes. Peace offerings aside, traders are looking at a very slow start to the week. Memorial Day in the United States and Spring Bank Holiday in the UK mean that both markets are closed today. In fact, markets will be starved of data until Thursday before the economic calendar brings the goods. The latest PCE Price Index is the headline event, with predictions eyeing 3.9% inflation in April in the US. The report will factor heavily into the next FOMC meeting on the 17th of June, the first presided by newly appointed Kevin Warsh, who was sworn in last Friday. With a new Chairman at the helm and a possible resolution in the Middle East, interest rate predictions may swing aggressively as various narratives shift and settle. Kevin Hassett, Trump’s chief economic advisor, claimed over the weekend that a resumption in Gulf trade would give the Fed room to lower rates. Thursday will also see the publication of the latest durable goods orders, as well as first-quarter GDP growth. Earnings season has more or less ground to a halt, with the only companies of note being Costco (COST) and Dell Technologies (DELL), both after market close on Thursday. Expectations surrounding Dell are more intense than ever after shares in the company rocketed 17% higher last Friday amid renewed optimism in the AI sector. #IRAN #NI225 #DELL
Trading forex without a strategy is a bit like trying to assemble IKEA furniture without the instructions. Technically possible? Maybe. Likely to end in confusion, frustration, and emotional damage? Absolutely. One of the biggest problems beginner traders face is a lack of structure. Many new traders jump into the market based on emotions, social media hype, or because someone on YouTube with rented Lamborghinis promised “easy pips.” Unfortunately, the market tends to punish emotional decision-making very quickly. Overtrading, revenge trading, and entering random positions without confirmation are all common beginner mistakes. This is why understanding chart patterns is so important in technical analysis. Chart patterns help traders identify potential market direction, momentum shifts, and possible reversal zones. Among the most respected reversal formations in forex trading is the Head and Shoulders Pattern. The head and shoulders pattern is widely used because it provides traders with a visual structure for spotting trend reversals before they fully develop. In simple terms, it can help traders identify when buyers are losing control and sellers may be preparing to take over. In this guide, we will explore: By the end of this article, you should have a far clearer understanding of how to trade the Head and Shoulders Pattern without treating every random squiggle on a chart like a “guaranteed reversal.” The Head and Shoulders Pattern is a technical analysis chart formation that signals a potential trend reversal. It usually appears after an uptrend and indicates that bullish momentum may be weakening while sellers begin taking control. The pattern consists of three peaks: a left shoulder, a higher head, and a right shoulder, with a neckline acting as key support. Once price breaks below the neckline, the bearish reversal is considered confirmed. Ready to start trading? Open your account today with Radex Markets The Head and Shoulders Pattern is a technical chart formation that signals a potential reversal from an uptrend into a downtrend. The term “Head and Shoulders Pattern” refers to a market structure made up of three peaks. The middle peak is the highest point and forms the “head,” while the two outer peaks form the “shoulders.” In forex trading, the head and shoulders pattern means that buying pressure may be fading and sellers could soon gain control of the market. The structure is made up of: One reason traders love this pattern is because it reflects market psychology extremely well. The market initially looks bullish, but each new rally becomes weaker. Eventually, buyers run out of momentum entirely. To put it simply, the market starts off confident, becomes uncertain, and then completely forgets how to go up. Why Traders Use It This is why the head and shoulders pattern remains one of the most widely respected reversal patterns in technical analysis. View All Chart Patterns You may also want to explore: 15 Best Chart Patterns Every Trader Should Know A head and shoulders pattern does not appear randomly. It develops gradually as market sentiment changes from bullish optimism to bearish pressure. Understanding the formation process is important because many beginners try to trade the pattern too early. A pattern is only valid once the structure and confirmation are complete. Before a standard head and shoulders pattern can form, the market should already be in a clear uptrend. This matters because the pattern is designed to signal a reversal. If there is no uptrend beforehand, there is technically nothing to reverse. A healthy uptrend normally shows: In my experience, one of the easiest mistakes beginners make is spotting “head and shoulders” formations in sideways markets. Sometimes traders stare at charts long enough that every candle suddenly looks like a pattern. At that point, it may be time for coffee. The left shoulder forms when the market creates a high before pulling back. At this stage, buyers still appear confident. The pullback is usually viewed as temporary profit-taking rather than a reversal. Psychologically, most traders still expect the uptrend to continue normally. The head forms when buyers push the market to a new higher high. This is often the final aggressive bullish move before momentum starts weakening. While price makes a higher high, traders should begin paying attention to whether momentum indicators or volume are showing signs of divergence. This is often where experienced traders start becoming cautious while beginners become overly excited and start posting rocket emojis online. The right shoulder forms when price attempts another rally but fails to break above the head. This failure is significant because it shows weakening bullish strength. Buyers are no longer capable of creating strong new highs. The right shoulder is often smaller or weaker than the left shoulder. The neckline connects the swing lows formed between the shoulders and the head. The neckline acts as a key support level. Once price breaks below this support, the pattern becomes confirmed. Necklines can be: A downward-sloping neckline is often considered more bearish because the market is already making lower lows before confirmation occurs. The breakdown occurs when price closes below the neckline. This confirms that sellers have gained control and the uptrend may be finished. Many traders enter short positions at this point while placing stop losses above the right shoulder. As a result, the neckline break becomes the most important confirmation stage of the entire pattern. The head and shoulders pattern does not always appear in a perfectly textbook format. In real market conditions, patterns can develop with different shapes, neckline angles, and levels of symmetry. This matters because beginner traders often expect every setup to look identical to the diagrams found in trading books. Unfortunately, the forex market rarely behaves that politely. Sometimes the pattern looks clean and obvious. Other times it looks like the chart had an argument with itself halfway through forming. Understanding the common variations of the head and shoulders pattern can help traders recognise valid opportunities more effectively while avoiding confusion. The standard head and shoulders pattern is the classic bearish reversal setup most traders learn first. It normally appears after an extended uptrend and suggests that bullish momentum is beginning to weaken. Once price breaks below the neckline, sellers often gain control of the market. Key Characteristics In practical trading, this is one of the cleaner reversal structures because it visually shows momentum fading over time. Buyers initially push price higher aggressively but eventually run out of energy. This is why many professional traders monitor this formation closely on higher timeframes like the 4-hour and daily charts. The inverse head and shoulders pattern is simply the bullish version of the standard setup. Instead of appearing after an uptrend, it forms after a downtrend and signals that sellers may be losing control while buyers begin stepping back into the market. In simple terms, the market stops falling, starts stabilising, and then begins building bullish momentum again. Key Characteristics One thing I have personally noticed over the years is that inverse head and shoulders patterns can sometimes produce stronger moves than bearish versions. The reason is psychological. Panic selling often exhausts itself quickly, and once buyers regain confidence, reversals can become very aggressive. Anyone who traded during sharp market recoveries after major news events has probably seen this happen in real time. A sloping neckline occurs when the neckline is angled upward or downward rather than remaining horizontal. Many beginners assume the neckline must be perfectly straight. In reality, this is rarely the case. Upward-Sloping Neckline An upward-sloping neckline suggests the market is still attempting to maintain some bullish momentum during the pattern formation. These setups may require stronger confirmation because the trend has not completely weakened yet. Downward-Sloping Neckline A downward-sloping neckline is generally considered more bearish because the market is already producing lower lows before the final breakdown. This can indicate stronger seller pressure developing earlier in the formation. In my experience, traders often underestimate the importance of neckline angle. A downward neckline break tends to produce cleaner momentum because the market structure is already shifting bearish before confirmation occurs. Meanwhile, upward-sloping necklines can sometimes lead to frustrating fake outs where price briefly breaks down before recovering again. Forex markets enjoy humbling impatient traders. It is practically part of the business model. An asymmetrical head and shoulders pattern forms when the shoulders are uneven in size, duration, or height. This variation is extremely common in live market conditions. The key thing beginners need to understand is this: The pattern does NOT need to look perfectly balanced to remain valid. Signs of an Asymmetrical Pattern The core principle is that the market still shows weakening momentum and failed attempts to continue the trend. Many traders miss perfectly valid setups because they expect chart patterns to resemble geometry homework. Real markets are messy. Central banks, institutions, retail traders, algorithms, and news events all create imperfect price movement. For this reason, flexibility and context matter more than perfection. A complex head and shoulders pattern contains additional shoulders, multiple retests, or extended consolidation before the final breakout. These formations often develop in highly volatile or uncertain market conditions. Characteristics of Complex Patterns Complex patterns can actually be very powerful because they represent a prolonged struggle between buyers and sellers. Eventually, when the breakout finally occurs, the move can become highly explosive because so much liquidity has built up during consolidation. Practical Trading Insight One thing beginners should avoid is forcing trades too early during complex formations. A market that keeps retesting the neckline without breaking usually indicates indecision. Waiting for proper confirmation often saves traders from unnecessary losses. Sometimes the best trade is the one you do not take. That sentence sounds annoyingly motivational, but unfortunately it is also true. Identifying a valid head and shoulders pattern requires more than simply spotting three peaks on a chart. Many beginners make the mistake of trading every “head-like” shape they see, only to discover the market had completely different plans. Successful pattern trading requires context, confirmation, and patience. A proper head and shoulders setup should include: When these elements align together, the probability of a successful reversal increases significantly. Trend context is one of the most important parts of identifying a head and shoulders pattern correctly. The head and shoulders pattern typically appears at the end of an uptrend because it is fundamentally a reversal pattern. If the market is already moving sideways or downward, the setup loses much of its meaning. In forex trading, an uptrend means more than just “price moving up.” A true uptrend normally includes: This distinction matters because many beginners assume any rising market automatically qualifies as a trend. Why Momentum Matters A strong trend usually shows aggressive bullish candles and clean continuation moves. As the head and shoulders pattern develops, that momentum often begins fading. You may notice: These subtle changes often provide early warning signs that buyers are losing strength. Personal Insight From my own trading experience, weakening momentum is often more important than the pattern itself. Sometimes the structure looks slightly messy, but if momentum clearly fades and buyers repeatedly fail to push higher, the reversal setup can still work extremely well. Meanwhile, perfectly shaped patterns inside strong bullish trends can fail spectacularly if buyers remain aggressive. This is why experienced traders focus on context first and patterns second. The standard structure of a head and shoulders pattern consists of: The left shoulder forms during the initial bullish rally before a temporary pullback occurs. The head forms when buyers push price to a higher high. However, the market then declines again, showing that sustaining higher prices is becoming difficult. The right shoulder forms when buyers attempt another rally but fail to exceed the previous high created by the head. This failure is extremely important because it reflects weakening bullish pressure. Real Markets Are Rarely Perfect One of the biggest misconceptions among beginners is that the pattern must be perfectly symmetrical. In reality: Perfect textbook patterns are actually less common than social media traders claiming 98%-win rates. Personal Insight In live trading, I often prioritise the market reaction around the neckline rather than obsessing over perfect symmetry. If the market repeatedly rejects higher prices and sellers become more aggressive near resistance, the setup may still be valid even if the shoulders are uneven. Flexibility is important because forex markets are driven by human emotion, institutional positioning, and economic events, not by artists drawing ideal chart formations. The neckline is one of the most important parts of the head and shoulders pattern because it acts as the key support level that separates a potential reversal from a confirmed reversal. The neckline is drawn by connecting the swing lows formed between the left shoulder, the head, and the right shoulder. Once price breaks below this level, the bearish setup becomes confirmed. In simple terms, the neckline is the market’s final line of defence for buyers. How to Draw the Neckline A neckline can be drawn in several ways depending on market structure: Why the Neckline Matters The neckline matters because it represents support. As long as price remains above support, buyers still have a chance to regain control. However, once price closes below the neckline, market sentiment often shifts aggressively bearish. This is why many traders wait specifically for neckline confirmation before entering a trade. Personal Insight One mistake I frequently see beginners make is entering trades before the neckline actually breaks. They spot the right shoulder forming and immediately assume the reversal is guaranteed. Then the market suddenly rallies higher, destroys the setup entirely, and traders are left staring at their screens wondering why “technical analysis failed.” Usually, the pattern did not fail. The trader simply entered too early. Patience around neckline confirmation can dramatically improve trading consistency. Volume behaviour can provide valuable confirmation when trading the head and shoulders pattern. Volume typically decreases as the pattern develops because buying enthusiasm gradually weakens over time. This decline in participation often reflects exhaustion among buyers. Typical Volume Characteristics This progression reflects changing market psychology. At first, buyers remain highly confident. However, by the time the right shoulder forms, enthusiasm has often faded significantly. Then, once the neckline breaks, sellers suddenly become aggressive and volume often increases sharply. Personal Insight In forex trading, pure centralized volume data is not always available in the same way it is in stock markets. However, traders can still use: to help estimate participation and pressure. In my experience, weak bullish momentum during the right shoulder is often more important than the actual volume numbers themselves. If price struggles to rally and bullish candles become small and hesitant, that alone can provide useful confirmation. Sometimes the market practically whispers: “I’m tired.” Head and Shoulders Volume Psychology Breakout confirmation is the final step that validates the head and shoulders pattern. A valid bearish breakout occurs when price closes decisively below the neckline support level. This breakdown confirms that sellers have gained control and the previous uptrend may be ending. Signs of a Valid Breakout A strong neckline breakdown often includes: These factors increase the probability that the reversal is genuine rather than temporary. What Is a False Breakout? A false breakout occurs when price briefly moves below the neckline but quickly reverses back above it. False breakouts are extremely common in forex trading because markets often trigger stop losses before moving in the opposite direction. This is why many experienced traders avoid entering immediately on the first small break. Common Signs of a False Breakout Personal Insight One thing I learned the hard way years ago is that not every neckline break deserves immediate trust. Sometimes the market breaks support during low liquidity periods, especially around major news events or quiet trading sessions, only to reverse violently afterward. For beginners, waiting for confirmation candles or retests can often improve consistency significantly. Yes, entering slightly later may reduce potential profit. But entering too early and getting stopped out repeatedly tends to reduce sanity instead. Ready to start trading? Open your account today. The Inverse Head and Shoulders Pattern is a bullish reversal chart formation that signals a potential transition from a downtrend into an uptrend. The term “Inverse Head and Shoulders” refers to an upside-down version of the standard bearish pattern. In forex trading, the inverse head and shoulders pattern means that selling pressure may be weakening while buyers gradually begin regaining control of the market. Instead of peaks, the inverse pattern forms using three troughs: This pattern is particularly important because it often appears near the end of major bearish trends where sellers become exhausted. In simple terms, the market stops collapsing, stabilises, and slowly begins recovering. Key Characteristics of the Inverse Head and Shoulders Pattern Price declines before bouncing temporarily higher. At this stage, bearish momentum still dominates, and most traders remain pessimistic about the market. Sellers push price to a lower low, creating the deepest trough in the structure. However, buyers begin stepping in more aggressively during the recovery phase. This often signals that bearish momentum is weakening. Price declines again but fails to create a new lower low. This is significant because it shows sellers are losing control. The neckline acts as resistance and connects the highs between the troughs. Once price breaks above this level, the bullish reversal becomes confirmed. The breakout above the neckline confirms the pattern and often triggers strong bullish momentum. This is where many traders begin looking for long opportunities. The inverse head and shoulders pattern reflects a psychological transition from fear to confidence. At the beginning of the structure, sellers remain dominant. However, each decline becomes weaker until buyers eventually regain control entirely. This matters because trend reversals are often driven by shifts in market psychology before they become obvious in price. Why Traders Watch This Pattern Closely In my experience, inverse head and shoulders patterns tend to work especially well after emotional selloffs. Once panic selling fades, the recovery can become surprisingly aggressive because traders rush back into the market after realising the worst-case scenario did not happen. Forex markets have a habit of terrifying traders at the bottom and exciting them near the top. It is one of their favourite hobbies. Understanding theory is important, but real trading examples help traders understand how these patterns behave under live market conditions. One thing beginners quickly discover is that charts rarely move as cleanly as textbook examples suggest. Real markets contain volatility, fake outs, news spikes, and emotional reactions. This is why studying practical examples is so valuable. Imagine EUR/USD has been trending lower for several weeks due to weak Eurozone economic data. Example Structure How the Setup Develops Personal Insight One thing I always look for with inverse head and shoulders setups is improving bullish momentum during the right shoulder. If buyers step in earlier during the second decline, it often signals that institutional traders may already be accumulating positions quietly. This is why the right shoulder frequently matters more than the head itself. Bearish Example, Standard Head and Shoulders on GBP/USD Now imagine GBP/USD has been rallying aggressively after strong UK inflation data. Example Structure How the Setup Develops Personal Insight In bearish head and shoulders setups, I often pay close attention to candle behaviour near the right shoulder. If bullish candles become smaller and rejection wicks increase, it usually signals weakening buying pressure. Very often, experienced traders begin quietly exiting long positions during this phase while inexperienced traders continue chasing the uptrend. Unfortunately, retail traders often become most confident right before reversals happen. The forex market can be a very expensive confidence-building exercise. Even when a head and shoulders pattern appears clearly on a chart, beginners should never assume the trade is automatically safe or guaranteed. The pattern itself only provides a potential market signal. Successful trading still depends on: Read moe:Best trading strategy guide: What every trader needs to know This matters because many traders lose money not because the pattern is “bad,” but because their execution is poor. In simple terms, spotting the pattern is only half the job. The real challenge is trading it correctly. The following section introduces four commonly used beginner-friendly strategies for trading the head and shoulders pattern. The breakout strategy is the most common and beginner-friendly way to trade a head and shoulders pattern. This approach involves entering the trade once price breaks decisively below the neckline support level. The idea behind the strategy is simple: Rather than predicting the reversal early, traders wait for confirmation that sellers have actually taken control. How the Breakout Strategy Works Entry Traders enter after price closes below the neckline. Some traders wait for: Read moe:Breakout trading strategy in forex: how to trade successfully Stop Loss The stop loss is usually placed: Read moe:What is a stop-loss order and how to set it Profit Target Many traders calculate the target by measuring: Distance from the head to the neckline Then projecting that same distance downward from the breakout point. Example Why Beginners Like This Strategy Personal Insight The breakout strategy is often the safest starting point for beginners because it forces patience. One thing I learned over time is that waiting for confirmation removes many low-quality trades. Yes, some moves will already be partially underway before you enter, but avoiding false setups is usually more important than catching every pip. Trying to predict reversals too early often turns trading into an expensive hobby. The retest strategy involves waiting for price to break below the neckline and then return to retest it before entering the trade. This is one of the most popular strategies among experienced traders because it often provides better entry prices and tighter stop losses. How the Retest Strategy Works Price must first break below the neckline convincingly. After the breakdown, price often retraces back toward the neckline. At this point, previous support may become new resistance. Traders look for bearish rejection signals such as: Why Retests Happen Retests occur because markets rarely move in straight lines. After aggressive selling, short-term traders often take profits while late buyers attempt to re-enter. This temporary recovery can create the retest opportunity. Advantages of the Retest Strategy Disadvantages Personal Insight The retest strategy has personally been one of my favourite approaches over the years because it often filters out emotional market noise. False breakouts frequently fail during the retest stage. If the neckline holds as resistance after the retest, the setup tends to become much stronger. That said, beginners sometimes become too patient and wait for the “perfect” retest that never comes. The market does not always provide luxury entry service unfortunately. The aggressive entry strategy involves entering the trade before the neckline officially breaks. This approach is designed for traders who want earlier entries and larger potential reward opportunities. However, it also carries significantly higher risk. In simple terms, this strategy attempts to anticipate the breakdown before confirmation occurs. How the Aggressive Strategy Works Traders typically enter during the formation of the right shoulder. The logic is based on the idea that: Common Entry Signals Aggressive traders may enter based on: Stop Loss Placement Because the trade is entered earlier, stop losses are usually placed: Why Some Traders Use Aggressive Entries Risks of Aggressive Entries This strategy can be dangerous for beginners because the pattern has not yet been confirmed. Common problems include: Personal Insight Aggressive entries can work extremely well in the right conditions, especially when momentum indicators strongly support the reversal. However, this approach requires experience and emotional discipline. Many beginners confuse “aggressive” with “reckless.” Those are not the same thing. Entering before confirmation can sometimes feel exciting because you catch the move early. Unfortunately, it can also feel deeply unpleasant when the market ignores your analysis completely and keeps rallying for another 300 pips. The forex market occasionally enjoys reminding traders who is actually in charge. The confirmation strategy focuses on combining the head and shoulders pattern with additional technical confirmation tools before entering a trade. This approach is often considered one of the more conservative and structured methods for beginners. Rather than relying solely on the pattern itself, traders seek extra evidence that the reversal is likely genuine. Common Confirmation Tools Traders may combine the pattern with: Read more:The best forex indicators every trader should use in 2025 Example of Confirmation Imagine GBP/USD forms a head and shoulders pattern. A trader notices: Together, these factors strengthen the bearish case. Why Confirmation Matters Confirmation helps traders avoid lower-quality setups. This matters because not every head and shoulders pattern leads to a successful reversal. Adding multiple layers of confirmation can improve: Disadvantages of Confirmation The main drawback is that confirmation may delay entry. This can sometimes reduce profit potential because part of the move has already occurred before the trader enters. However, many traders prefer slightly smaller profits in exchange for higher-quality setups. Personal Insight One thing I have noticed over the years is that beginner traders often become obsessed with finding a “perfect indicator. “I am sorry to disappoint you, but there isn’t one. Unfortunately, no indicator predicts the future perfectly. The real value comes from combining: When several pieces of evidence align together, trading decisions become far more logical and less emotional. And anything that reduces emotional decision-making in forex trading is generally a very good thing indeed. The following comparison table summarises the strengths and weaknesses of each strategy to help beginners choose an approach that suits their personality and risk tolerance. Although the head and shoulders pattern can provide powerful reversal signals, many traders still lose money by applying it incorrectly. Most trading mistakes do not come from lacking intelligence. They come from impatience, emotional decision-making, and forcing trades that are not truly there. The following mistakes are among the most common problems beginner traders face when trading this pattern. Read moe:10 Forex risk management tips every trader should know One of the biggest mistakes beginners make is entering before the neckline breaks. They see the right shoulder forming and immediately jump into the trade assuming the reversal is guaranteed. Unfortunately, many markets continue trending higher before confirmation occurs. Why This Is Dangerous Without confirmation: Better Approach Waiting for: can often improve trading consistency significantly. Patience may feel boring, but blowing up accounts tends to feel a lot worse. Misidentifying the pattern is another extremely common mistake among beginner traders. Sometimes traders become so eager to find setups that they start seeing head and shoulders formations everywhere. After staring at charts for several hours, even random price movement can suddenly start looking “technical.” This is why proper structure and context matter. Common Misidentification Problems A valid head and shoulders pattern should show a gradual transition from bullish strength to bearish weakness. If the market is simply moving sideways randomly, the pattern usually loses reliability. Personal Insight One thing I learned over time is that forcing trades almost never ends well. Some days the market provides clean setups. Other days it produces absolute chaos that resembles a toddler drawing on a wall with crayons. Professional traders understand that not trading is sometimes the smartest decision available on days like that. Ignoring the overall market trend can dramatically reduce the effectiveness of the head and shoulders pattern. The standard head and shoulders formation works best after a strong bullish trend because it signals a potential reversal from bullish conditions into bearish conditions. Without trend context, the pattern becomes far less meaningful. Why Trend Context Matters Strong trends create: These factors help create genuine reversal opportunities. Common Beginner Mistake Many beginners attempt to trade head and shoulders patterns: This often leads to failed trades and confusion. In my experience, the higher timeframe trend should always be respected. For example: The market becomes far more dangerous when traders ignore the broader picture. Trying to short aggressively during strong bullish central bank momentum is a bit like standing in front of a moving train and hoping confidence alone will solve the problem. False breakouts are one of the most frustrating parts of trading the head and shoulders pattern. A false breakout occurs when price briefly moves below the neckline but quickly reverses higher afterward. This traps traders who entered too aggressively without proper confirmation. Why False Breakouts Happen False breakouts often occur because: Forex markets are heavily driven by liquidity. Large market participants know where traders commonly place stop losses, and neckline breaks are one of the most obvious areas. Signs of a Potential False Breakout How to Reduce False Breakout Risk Many traders improve consistency by waiting for: Personal Insight One lesson the market teaches eventually is this: The first breakout is not always the real breakout. Many beginners assume the moment price touches the neckline; the market will immediately collapse. In reality, markets often create fake moves first to trap impatient traders. This is why disciplined confirmation matters so much. Unfortunately, the market has an excellent sense of humour when it comes to punishing impatience. Poor risk management is probably the single biggest reason traders fail, regardless of how good the pattern itself may be. Even the best head and shoulders setup can fail unexpectedly due to: For this reason, risk management should always come before profit potential. Common Risk Management Mistakes Why Stop Losses Matter A stop loss protects trading capital when the market moves against the setup. Many traders place stops: This helps define risk clearly before entering the trade. Risk-to-Reward Ratios Many traders aim for: For example: This means traders can still remain profitable even if some trades lose. Personal Insight One of the hardest lessons for beginners is accepting that losing trades are normal. Even professional traders lose regularly, it is just part of trading. The goal is not perfection. The goal is consistency. A trader risking 1% per trade can survive a losing streak calmly. A trader risking 20% per trade usually ends up learning advanced emotional vocabulary very quickly. This is why long-term survival matters more than short-term excitement. A standard head and shoulders pattern is generally considered bearish because it signals a potential reversal from an uptrend into a downtrend. An inverse head and shoulders pattern is bullish because it signals a reversal from bearish conditions into bullish momentum. A head and shoulders pattern is a technical analysis chart formation that indicates a potential reversal from a bullish trend to a bearish trend. It suggests that buying momentum is weakening while sellers gradually begin taking control of the market. There is no single “most powerful” pattern because market conditions constantly change. However, many traders consider reversal formations such as head and shoulders, double tops, and inverse head and shoulders among the most reliable when combined with proper confirmation and risk management. The head and shoulders pattern can be traded across multiple financial markets including forex, stocks, indices, commodities, and cryptocurrencies. The pattern works best in markets with strong trends and good liquidity. How much can I trust the head and shoulders pattern? The head and shoulders pattern can be highly effective when traded with confirmation, trend context, and proper risk management. However, no pattern guarantees success, and false breakouts can still occur in volatile market conditions. Many traders prefer higher timeframes such as the 4-hour and daily charts because they often produce cleaner and more reliable setups. Lower timeframes may generate more noise and false signals. Yes, beginners can use the head and shoulders pattern effectively if they focus on confirmation, risk management, and patience. Starting with simple breakout or retest strategies is often the safest approach for new traders. The Head and Shoulders Pattern remains one of the most respected reversal formations in technical analysis because it reflects real shifts in market psychology, momentum, and trader behaviour. Throughout this guide, we explored: In simple terms, the pattern helps traders recognise when bullish momentum may be fading and when sellers could begin taking control of the market. However, successful trading does not come from memorising patterns alone. Long-term consistency usually comes from: This is why beginners should focus on developing structured habits rather than chasing quick profits. One of the best ways to improve is by studying charts regularly, practising on demo accounts, and learning how patterns behave across different market conditions and timeframes. Over time, traders begin recognising not only the patterns themselves, but also the psychology behind them. And that psychology is often what truly moves the market. Because at the end of the day, forex trading is not really about predicting the future perfectly. It is about managing risk intelligently while giving yourself a consistent edge over time. And preferably doing so without turning every small losing trade into a full emotional documentary series.
Global bond markets are under pressure. From the US to Germany to Japan, government bonds are undergoing a sustained selloff, lifting yields to levels not seen in years and in some cases, decades. Yesterday, the yield on the 10-year US Treasury note rose to 4.67%, the highest seen since January 2025. Longer-dated treasuries, which are typically more sensitive to long-term economic shifts, are being hit even harder, with yields on 30-year treasuries climbing to 5.18%. In the United Kingdom, the yield on 10-year gilts is up to 5.13%, while those on 30-year gilts have reached 5.79%. Such rates have not been seen since 2008 and 1998, respectively. The yield on the 10-year German Bund hit its highest level since 2011. Japanese 10-year and 30-year bonds are currently offering their highest yield since the late 1990s. While different parts of the world may display slightly different symptoms, the underlying disease is the same. Markets are demanding a premium to hold government debt due to a sense of uncertainty that is currently pervading financial circles. The threat of sustained high oil prices has people on edge because of the direct impact on inflation, which is already running hotter than most policymakers would like. Should inflation continue to rise, the income paid out by bonds will depreciate in real terms, limiting the appeal of such financial instruments. Coupled with the above, central banks are no longer engaged in quantitative easing as they were in previous years; the Fed, the ECB and the BoE all stopped buying their respective government bonds several years ago, leaving the market to soak up all new treasury issuances. With little else going on at the start of this week, markets are looking towards Nvidia (NVDA) earnings later today. Historically, shares in the chip manufacturer have performed well after earnings, although the observed effect has been more muted in recent years. In all likelihood, Nvidia will indeed beat estimates, but such accolades are no longer enough to significantly move the needle. The S&P 500 and Nasdaq both dipped yesterday amid the selloff in the bond market, providing no momentum to build upon going into today’s session. #NVDA #BONDS #INFLATION
You know, I have been trading for over 15 years and there is one thing that I was shown when I first started trading that actually works is divergence trading. If you can master divergence trading, then this will give you a huge advantage over other traders that are searching for the ‘Holy Grail’ of trading strategies. Divergence trading is one of those trading concepts that sounds incredibly complicated at first… until someone explains it properly. Then suddenly you realise traders have basically been looking for “warning signs” between price and indicators all along. In simple terms, divergence happens when the price on the chart and a technical indicator start disagreeing with each other. It’s a little like your car dashboard telling you everything is fine while smoke is pouring out of the bonnet. One of them is clearly lying. In forex trading, divergence can help traders spot: And the great news? You do not need to be an evil mathematical genius living in a dark room surrounded by 14 monitors to understand it. This guide will break divergence trading down in beginner-friendly language, explain how traders use indicators like RSI and MACD, and show you how divergence can fit into a real forex trading strategy without turning your chart into modern art. If you can learn to trade using divergence, then no matter what other great strategy might come your way I can honestly say it will not be as good. In forex trading, “divergence” means the price movement and a technical indicator are moving in different directions. Normally, indicators and price should move together. If price makes a strong new high, momentum indicators should usually make a strong new high too. But when they do not? That is where divergence appears. For example: That suggests bullish momentum may be weakening even though price is still climbing. Think of it like a football team winning matches while slowly playing worse every week. The results still look good… but something underneath is deteriorating. That is exactly what divergence tries to identify. The forex market moves heavily on momentum. When buyers are strong, prices rise aggressively. When sellers dominate, prices fall sharply. But momentum does not last forever. Eventually: Divergence helps traders detect these momentum shifts before the market fully reverses. This is why divergence trading became extremely popular among: Many traders use divergence as an “early warning system.” Not a crystal ball. Not magic. Not “guaranteed 98% accuracy” like that bloke on YouTube filming beside a rented Lamborghini. Just a warning sign. And sometimes, warning signs are incredibly valuable. Divergence happens because indicators measure momentum differently from raw price. Price itself only shows where the market currently is. Indicators like RSI and MACD try to measure: Sometimes price continues rising simply because of: Meanwhile, the indicator quietly says: “Actually… momentum is fading here.” That disconnect creates divergence. There are two primary types of divergence traders look for: These are the foundations of divergence trading. Bullish divergence happens when: This suggests bearish momentum is weakening. The market is still falling… but sellers are losing strength. A reversal higher may soon happen. Imagine EUR/USD falls: Price made a lower low. But RSI: RSI made a higher low. That creates bullish divergence. The market is essentially saying: “Yes, price dropped again… but not with the same strength.” Bearish divergence happens when: This suggests bullish momentum is weakening. Buyers may be running out of energy. A bearish reversal could be approaching. GBP/USD rises: Price made a higher high. But MACD or RSI: Momentum failed to confirm the move. That creates bearish divergence. It is basically the market equivalent of somebody trying to sprint after eating a full Christmas dinner. The effort is there. The energy is not. Understanding market psychology is crucial. Most beginner traders only look at the price. Professional traders often focus on: Divergence reveals emotional imbalance. For example: This often happens near market bottoms. This often appears near market tops. Now things get slightly more advanced. There are actually two major categories of divergence: Beginners should master regular divergence first. But hidden divergence is extremely useful later. Regular divergence mainly signals: Potential reversals This is the classic divergence setup most traders learn first. Hidden divergence mainly signals: Trend continuation This is where many beginners get confused. Hidden divergence suggests the current trend may continue after a pullback. This suggests: This suggests: Not all indicators work equally well for divergence. The most popular choices are: Most beginners start with RSI because it is visually simple to read. The Relative Strength Index (RSI) is probably the king of divergence indicators. RSI measures momentum on a scale from 0 to 100. Typically: The formula behind RSI is not something beginners need to memorise, but understanding the concept matters. RSI = 100 - 100 / (1+RS) What matters most is how RSI behaves compared to price. RSI divergence is popular because: However, … RSI divergence alone should NEVER be your entire strategy. That is how traders end up revenge trading at 2am while questioning every life decision that led them to opening a leveraged gold position. The MACD indicator is slightly more advanced. MACD focuses on: It is excellent for spotting larger reversals. The basic MACD relationship comes from moving averages. MACD = EMA12 − EMA26 Many swing traders prefer MACD divergence because: The downside? Signals usually appear later than RSI. This depends on trading style. Higher timeframes generally produce: Lower timeframes: A 1-minute chart can sometimes look like a caffeinated squirrel designed it. Now we get into the practical side. Here is a beginner-friendly divergence trading process. First determine: Divergence works best after strong trends. Most beginners should start with: Keep your charts clean. You do not need: Simple works better. Look carefully: Or: This is where divergence appears. This is critical. Never trade divergence blindly. Wait for: Many beginners lose money because they enter too early. Divergence can remain active for a long time before price reverses. Always use: Because divergence is NOT perfect. Sometimes momentum weakens… …and price still keeps running another 300 pips just to personally offend your trading account. This is where divergence becomes far more powerful. Divergence alone is decent. Divergence PLUS key levels? Much stronger. For example: Now you have: Confluence matters heavily in trading. Many traders combine divergence with candlestick setups such as: For example: That combination can provide stronger confirmation. Most beginners make the same divergence mistakes repeatedly. Let’s save you some pain. Not every divergence matters. Markets produce weak divergence signals constantly. Quality matters more than quantity. Counter-trend divergence trades are risky. Trying to short a powerful trend simply because RSI diverged slightly can be financially educational in the worst possible way. This is probably the biggest mistake. Divergence signals POTENTIAL reversal. Not immediate reversal. Price can continue trending for quite a while. Never assume divergence guarantees success. No setup is perfect. Even institutional traders lose trades regularly. Risk management keeps you alive long enough to improve. Some traders eventually turn their charts into: Keep things simple. Good traders survive because of risk management. Not because they predict every reversal perfectly. Even the best divergence setups fail sometimes. That is why professional traders focus heavily on: A simple risk formula traders often use is: Risk-to-Reward = Potential Profit / Potential Loss Many traders aim for: Meaning: This helps traders remain profitable even without winning every trade. Yes it does. Divergence can be used in: However, different markets behave differently. For example: So, context matters. A lot. Many divergence traders prefer: These pairs often provide: Exotic pairs can sometimes produce messy signals due to lower liquidity. Divergence trading is one of the most useful tools beginner traders can learn because it teaches an incredibly important lesson: Price alone does not tell the whole story. Momentum matters. Market psychology matters. Exhaustion matters. The real power of divergence comes from using it alongside: Not as a standalone “magic indicator.” Used correctly, divergence can help traders: And perhaps most importantly… It can help beginners stop buying the absolute top of the market five minutes before a reversal candle appears that looks like financial karma. As I have already said; if you can master divergence trading and have the ability to spot when a market is about to turn, it like having a trading superpower that very few traders possess. Yes. Divergence trading is relatively beginner-friendly because it visually shows momentum weakness. However, it should always be combined with confirmation and risk management. Most beginners use RSI because it is simple and visually clear. MACD is also highly popular for divergence strategies. No. Divergence only suggests weakening momentum. Price can continue trending before eventually reversing. Yes. Many scalpers use divergence on lower timeframes like the 1-minute and 5-minute charts, although signals become less reliable due to market noise. Neither is necessarily “better.” Regular divergence focuses on reversals, while hidden divergence helps identify trend continuation setups.
Investors hoping for some kind of resolution on Iran following Trump’s visit to China have been left disappointed. The meeting between the two leaders appeared to focus almost entirely on trade, the most important aspect of which is China’s commitment to purchase $17 billion worth of US agricultural products annually through 2028. Other agreements, relating to reducing tariffs on non-critical goods, are expected to be negotiated in the coming months. With regards to Iran, or Taiwan for that matter, very little emerged from the latest summit, dampening prospects of de-escalation in the Middle East. In the same vein, recent drone attacks in the UAE and Saudi Arabia have done nothing to improve sentiment in the region. Adding fuel to the fire, President Trump claimed that “the Clock is Ticking” for Iran, potentially opening the door for further military intervention. Predictably, oil prices rose again this morning, with the Brent Crude benchmark climbing to $111 per barrel and WTI rising to $107. With the US-China meeting out of the way, markets are facing a void of activity going into this week, leaving traders on unsure footing. Asian indices are a mixed bag this morning; the Nikkei 225 lost 1.5% at one point before partially paring losses; the Korean Kospi index fell over 4% as the session got underway before rising back into the green; finally, the Hang Seng shed 1.5% earlier today, finding little support on the way down. Currencies have yet to pick a direction, although last week’s surge in the US dollar is threatening Asian currencies with fresh lows. The Japanese yen tapped 159 against the Greenback this morning, while the Korean won is once again above 1,500 per dollar. The Euro meanwhile is clinging onto $1.16 for dear life as cable struggles to stay above $1.33. The DXY rose 1.5% last week as traders increasingly abandon the possibility of an imminent interest rate cut. Precious metals are still reeling from last Friday’s brutal selloff, which saw gold lose over $100 per ounce. Silver fared even worse, crumbling 9% as strength in the dollar pulled the rug from under non-yielding assets. The sudden shift has metals acting sheepishly this morning as the week gets underway. Cryptocurrencies are looking equally frail after a cascade of liquidations knocked Bitcoin down from $82,000 late last week to under $77,000 this morning. Crypto investors were granted a rare spark of hope after the Clarity Act advanced to the US Senate last week, although no date has been set for a vote as of yet. The economic calendar is exceptionally barren over the next few days. Japanese GDP figures may provide some interest on Tuesday, followed by inflation data from Canada, the UK and Europe over the next few days. The best traders can hope for are the latest FOMC minutes, set to be published late on Wednesday. The comments justifying the latest rate hold are unlikely to provide much in terms of novel insight, but the meeting was symbolic in that it marked the final chapter in Jerome Powell’s tenure as Fed Chairman. Fortunately, the lack of scheduled economic events is overshadowed by an absolute behemoth on the earnings calendar. Nvidia (NVDA) will report its first-quarter earnings after the closing bell on Wednesday and expectations are, as usual, sky-high. The chipmaker hit a $5.7 trillion market cap last week and is up 20% so far this year. #NVDA #OIL #BTC
