How to Trade Head & Shoulders Chart Pattern in XAUUSD

How to Trade the Head and Shoulders Chart Pattern

Head & Shoulders Chart Pattern

Head and Shoulders Pattern is a reversal trading pattern which forms after an extended XAUUSD upward trend.

Head & Shoulders Pattern is made up of three consecutive peaks, the left shoulder, the head & the right shoulder with 2 moderate troughs between the 2 shoulders.

This Head & Shoulders Pattern is considered complete once gold price penetrates and moves below the neckline, which is drawn by joining the two troughs between the shoulders pattern.

To open a sell xauusd trade after this reversal xauusd signal, XAUUSD traders place their sell stop orders just below neck line.

Summary:

• This Head & Shoulders Chart Pattern forms after an extended move upward - xauusd upward trend
• This Head and Shoulders Pattern formation indicates that there will be a reversal in gold trading market
• This Head and Shoulders Pattern formation resembles a head with shoulders thus its name.
• To draw the neckline we use chart point 1 & point 2 as illustrated on the xauusd example shown below. We also extend this line in both directions.
• We sell when price breaks-out below the neckline: as described on the gold trading example shown below.

XAUUSD Trade Head & Shoulders Chart Pattern in XAUUSD?

Or the head & shoulders pattern can also form on a slanting neck line, like the xauusd example shown below:

XAUUSD Trade Head & Shoulders Chart Pattern in XAUUSD?

Examples of Head and Shoulders XAUUSD Pattern on a XAUUSD Chart

How to Trade the Head and Shoulders Chart Pattern

This Head & Shoulders Chart Pattern can also be formed on a slanting neck line, like the head and shoulders chart pattern example above, the neck-line does not have to be necessarily horizontal.