How Do I Analyze Head and Shoulders Chart Pattern?

How Do You Trade Head and Shoulders Chart Pattern?

Head and Shoulders Pattern is a reversal pattern which forms after an extended forex upwards trend.

Head and Shoulders Chart Forex Chart Pattern is made up of 3 consecutive forex price peaks, the left shoulder, the head and the right shoulder with 2 moderate forex price troughs between the two shoulders.

This Head and Shoulders Chart Pattern is considered to be complete once the forex price penetrates and moves below the neckline - the neckline is drawn by joining the two forex price troughs in between the two shoulders.

To open a sell forex trade after this forex reversal signal - traders will place their sell stop pending orders just below the neckline.

Summary: How Do You Interpret Head and Shoulders Chart Pattern?

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

How Do I Interpret Head and Shoulders Chart Pattern?

The head and shoulders chart pattern can also form on a slanting neckline - like on the head and shoulders chart pattern example below:

How Do I Interpret Head and Shoulders Chart Pattern?

Head & Shoulders Chart Pattern on a Chart

How Do I Analyze Head and Shoulders Chart Pattern?

Head & Shoulders Pattern can also be formed on a slanting neck line - like on the head and shoulders chart pattern examples above - the neck line doesn't necessarily have to be horizontal.

How Do I Interpret Head and Shoulders Chart Pattern?