What's Head & Shoulders Chart Setups in XAUUSD?
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This Head & Shoulders patterns charts tutorial explains how to identify chart patterns - spotting chart patterns is the first step when it comes to learning how to trade with Head & Shoulders patterns in XAUUSD.
Head & Shoulders price patterns commonly form on charts and this chart pattern analysis guide explains how to trade and analyze charts using Head & Shoulders trading patterns.
Head & Shoulders Pattern
Head & Shoulders Chart Pattern is a reversal chart pattern which forms after an extended upward trend. Head & Shoulders Pattern is made up of three consecutive peaks, the left shoulder, the head and the right shoulder with two moderate troughs between the shoulders.
This Head & Shoulders Setup is considered complete once price penetrates and moves below the neck line, which is drawn by joining the two troughs between the shoulders setup.
To go short, traders place their sell stop orders just below neckline.
Summary:
- This Head & Shoulders Chart Pattern forms after an extended move upward
- This Head & Shoulders Pattern formation indicates that there'll be a reversal in trading market
- This Head & Shoulders Chart Pattern formation resembles head with shoulders thus its name.
- To draw the neck line we use chart point 1 and point 2 as illustrated below. We also extend this line in both directions.
- We sell when the price breaks-out below neck-line point: see the chart below for explanation.
Head & Shoulders Chart Pattern - What is Head & Shoulders Chart Setups in XAUUSD?
Or the head and shoulders pattern also can form on a slanting neck-line, like the example illustrated below:
Head & Shoulders Pattern - Trading Gold Identify a Head & Shoulders Pattern in XAUUSD?
Examples of Head & Shoulders Setup on a Chart
Head and Shoulders Chart Pattern - Trading Gold Identify a Head & Shoulders Pattern in Gold?
This Head & Shoulders Chart Setup can also be formed on a slanting neckline, like the one above, the neck-line doesn't have to be necessarily horizontal.
