Quasimodo is the most important price action as well as a trend reversal pattern. This is the ultimate indication of a trend reversal in price. Many successful traders trade the Quasimodo pattern because this pattern is an indication of the end of the previous trend and the beginning of a new trend. A trade captured from the beginning of a trend will give a high risk-reward ratio. That’s the main reason for its importance in forex technical analysis. Quasimodo trading strategy is the best strategy in forex technical analysis.
Read this article to the end I will share the strategy to trade the Quasimodo pattern with confluence which will give high-risk-reward setups.
What is Quasimodo Pattern?
Quasimodo is a Reversal Chart pattern that is used in technical analysis to predict the change of trend. let’s discuss from the beginning. A bullish trend consists of at least two higher highs and two higher lows whereas a bearish trend consists of at least two lower lows and two lower highs. So when will a trend be reversed?
- In the case of a bullish trend, after at least two high highs and Higher Lows when a lower low will form then the trend will reverse. It will decide either to form a ranging structure in the future or the beginning of a bearish trend.
- In case of a bearish trend, after at least two lower lows and lower highs when a higher high will form then the bearish trend will reverse. Here price will then decide either to go with a bullish trend or to form a ranging price structure.
After the reversal in a trend either higher high or lower low, the price will give a pullback to pick unfilled orders. Our goal is to trade with institutions. The purpose of a pullback by the price is to pick those selling (in case of bullish reversal) or buying (in case of bearish reversal) orders which are not filled. We have to watch for the key levels here.
Key levels are the areas where unfilled orders are placed by ITs. Here in the case of the Quasimodo pattern, the left shoulder will act as a key and strong level. During pullback, the price will pick orders and a new trend will begin by institutional traders. And as retail traders, we will ride the trend created by institutional traders by using the Quasimodo pattern. This is the psychology behind this Quasimodo pattern. Quasimodo pattern is also called as Over and Under Pattern.
Quasimodo Trading Setup
Trading the Quasimodo pattern is very simple but trading with confluences is a difficult task. Let me show you first about stop loss, take profit, and entry levels. In the next topic, we will also discuss the confluences to add.
As already discussed, when the price will give a pullback then it will pick unfilled orders and the key level here is the left shoulder level. We will wait for the price to retrace to the left shoulder level and then we will enter. There is a good strategy here to add a supply and demand zone at the left shoulder level as an entry point. I will show you in the next heading. Here just remember left shoulder as entry-level.
Stop loss level will be above the higher high or below the lower low. Look at the image below for clear understanding.
Take profit level will be the recent lower low in case of bullish reversal. In case of bearish reversal, take profit level will be at the recent higher high.
Quasimodo Trading Strategy
Quasimodo pattern alone is not profitable. Without confluence, it will not work at all. What we have to do? We have to increase the probability of this pattern by adding confluences. Simple!. Following are the necessary confluences to add.
- Supply and demand zone
- Trend Analysis
- Higher timeframe analysis
The supply and demand zone will help us to pinpoint our entry and higher timeframe analysis will help us to pick a valid trade only and to elongate take profit level.
If you don’t know about supply and demand zone then click here to first learn supply and demand.
QML Supply and demand
As left shoulder level is a key level. Our focus is to look for a supply zone or demand zone at the left shoulder level. Because the price will not reverse exactly from the left shoulder price. That’s why a supply or demand zone at this key level will add more power to our setup. The Stop-loss level can also be just above the supply zone or below the demand zone. Managing stop loss will increase the risk-reward ratio. This is your first confluence.
There must be a clear trend before the formation of the Quasimodo pattern. I mean at least two higher highs and two higher lows are enough and the Quasimodo pattern at a resistance or support level is a good sign.
Higher timeframe Analysis
Higher timeframe analysis is necessary to step to follow every time before entry. The higher timeframe trend must match with the lower timeframe setup. Like if a higher timeframe trend is bullish then you must catch a bearish reversal Quasimodo pattern. On the other hand, if a higher timeframe trend is bearish then you must pick a bullish reversal pattern.
There are a few important strategies to determine a valid Quasimodo Pattern using Flag limit and FTR. I will discuss in detail in the next Post.
I hope you will like this Article. For any Questions Comment below, also share by below links. Use Tradingview for technical analysis instead of mt4.
Note: All the viewpoints here are according to the rules of technical analysis. we are not responsible for any type of loss in forex trading.