How Do You Trade Head and Shoulders Chart Pattern? - Head and Shoulders Pattern

How to Trade the Head and Shoulders Pattern - Head and Shoulders Pattern

Head & Shoulders Chart Pattern

Head & Shoulders Pattern is a reversal chart pattern that forms after an extended Forex upwards trend.

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

This Head and Shoulders Chart Pattern is considered complete once price penetrates below the neckline, which is plotted by joining the two troughs between the shoulders.

To open a sell forex trade after this reversal forex trading signal, Forex traders place their sell stop orders just below the neck line.

Summary:

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

How Do You Trade Head and Shoulders Chart Pattern? - Technical Analysis of Head and Shoulders Chart Patterns?

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

How Do You Trade Head and Shoulders Chart Pattern? - Technical Analysis of Head and Shoulders Chart Patterns?

Examples of Head & Shoulders Forex Pattern on a Chart

How to Trade the Head and Shoulders Pattern - How Do You Analyze Head and Shoulders Chart Patterns?

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