What is the QM pattern?
QM, also known as the Quasimodo Pattern, is a chart pattern that traders commonly use to identify potential reversal points in price action.
What is the origin of the QM pattern?
The name comes from a character in the novel The Hunchback of Notre-Dame by Victor Hugo. Quasimodo is a hunchbacked man with uneven shoulders, which resemble the price chart pattern. Therefore, this pattern is named Quasimodo or QM.
The characteristics of the QM pattern
The QM pattern is similar to the Head & Shoulders pattern, but differs in that the right shoulder of the price chart is lower than the left shoulder, meaning the current low is lower than the previous low despite having just made a higher high. This indicates an abnormal price structure.
How to trade using the QM pattern
QM is a pattern that traders use as a signal to find entry points for profit from price reversals because the price structure has been broken. According to Dow Theory, in an uptrend, prices must create higher highs and higher lows, while in a downtrend, prices must create lower highs and lower lows.
If a QM pattern forms in an uptrend, we use the previous High as the point to open a Sell order.
If a QM pattern appears in an uptrend, we use the previous Low point as the entry point to open a Buy order.
