What Does Head and Shoulders Chart Pattern Mean? - What Happens After a Head and Shoulders Chart Pattern?

Head & Shoulders Chart Pattern is a reversal pattern which 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.

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

Summary:

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

What Does Head and Shoulders Chart Pattern Mean? - What Happens to Forex Price Action After a Head and Shoulders Chart Pattern?

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

What Does Head and Shoulders Chart Pattern Mean? - What Happens to Forex Price Action After a Head and Shoulders Chart Pattern?

Examples of Head and Shoulders Forex Pattern on a Chart

How to Analyze the Head and Shoulders Chart Pattern - Forex Price Breakout after Head and Shoulders Pattern

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.