Reversal Chart Patterns: Head and Shoulders & Reverse Head Shoulders

Head and Shoulders Chart Pattern

Head and Shoulders chart pattern is a reversal chart pattern that forms after an extended Forex upward trend. It 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 and Shoulders chart pattern is considered complete once price penetrates below the neckline, which is drawn by joining the two troughs between the shoulders.

To go short, Forex traders place their pending sell stop orders just below the neckline of this Head and Shoulders chart pattern.

Summary of Head and Shoulder Chart Pattern:

• Head and Shoulders chart pattern forms after an extended upwards trend move
• This Head and Shoulders chart pattern formation indicates that there will be a reversal in the forex market
• This reversal forex chart pattern formation resembles head with shoulders thus its name.
• To draw the neckline of this reversal chart pattern we use chart point 1 and point 2 as shown and explained below. We also extend this line in both directions.
• We sell when the forex price breaks below the neckline; see the chart below for explanation.

Or the head and shoulders chart pattern neckline can also form on a slanting neckline, like on the forex trading example below:

Example of Head and Shoulders Pattern on a Forex Trading Chart

Head and Shoulders Pattern - Head and Shoulders Forex Chart Pattern Explained

This Head and Shoulders chart pattern can also be formed on a slanting neckline, like the one above, the neckline on this reversal head and shoulders chart pattern does not have to be necessarily horizontal.

Reverse Head and Shoulders Chart Pattern

This is a reversal head and shoulders pattern that forms after an extended Forex downtrend. It resembles an upside-down head shoulders. Reverse Head and Shoulders chart pattern is the opposite of Head and Shoulders chart pattern

This Reverse Head and Shoulders chart pattern is considered complete once the forex price penetrates above the neckline, the neckline is drawn by joining the two peaks between the reverse shoulders pattern.

To go long buyers place their pending buy stop orders just above the neckline of this Reverse Head and Shoulders chart pattern.

Summary of Reverse Head and Shoulders Chart Pattern:

• Reverse Head and Shoulders chart pattern forms after an extended downwards trend move
• This Reverse Head and Shoulders chart pattern formation indicates that there will be a reversal in the forex market
• Reverse Head and Shoulders chart pattern formation resembles an upside-down Head and Shoulders chart pattern, thus its name Reverse Head and Shoulders chart pattern.
• We buy when the forex price breaks above the neckline; see the chart below for explanation.

Example of Reverse Head and Shoulders Pattern on a Forex Chart

Example of Reverse Head and Shoulders Pattern - Reverse Head and Shoulders Chart Pattern Explained