Steep Neckline Take Profit (Experimental)
Status: Experimental rule - tracking results to validate
The Problem
When the neckline slopes steeply against the trade direction, the standard take profit (measured move to opposite neckline) often doesn't get hit. Price tends to reverse earlier.
The Rule
When the neckline is steep against the trade direction, only expect a retracement to 0.618 of the distance between the necklines.
Identifying "Steep Against"
- H&S (short): Neckline slopes DOWN (left neckline higher than right neckline)
- iH&S (long): Neckline slopes UP (left neckline lower than right neckline)
In both cases, the neckline angle works against reaching the full measured move target.
Example: AUD/HKD H&S
In this H&S pattern:
- The neckline slopes downward (against the short trade)
- Standard TP would be at the 1.0 or beyond level
- Price only reached approximately the 0.618 level before reversing
- Entry at neckline retest coincided with the 0.618 retracement zone
Application
- Measure the distance between left neckline and right neckline
- Apply Fibonacci retracement from head to right neckline
- Set TP at the 0.618 level instead of the full measured move
- This gives a more conservative but higher probability target
When to Use
- Neckline has a noticeable slope against trade direction
- Consider using 0.618 TP for first target, with runner to full TP
- Especially relevant on lower timeframes (M15, H1) where momentum fades faster
Tracking
Document trades where this rule applies to validate its effectiveness over time.