What is Head and Shoulders Pattern 🕯
The Head and Shoulders pattern is one of the most well-known chart formations in trading. It signals that a trend might be about to reverse — usually from bullish to bearish. The pattern consists of three peaks:
🟢The first is the left shoulder: a price high followed by a pullback.
🟢Then comes the head: a higher high, followed again by a pullback.
🟢Finally, the right shoulder: a lower high, roughly equal to the left one.
The key element is the neckline, which connects the lows between the shoulders and the head. Once price breaks down below the neckline, it usually confirms the trend reversal.
How to trade it:
1️⃣Wait for confirmation. Don’t short just because it “looks like” a Head and Shoulders. Only enter when the neckline breaks with volume.
2️⃣Set a target. Measure the distance from the head to the neckline — that’s your potential downside move after the breakdown.
3️⃣Use a stop-loss. Place it slightly above the right shoulder. If price breaks above, the pattern is invalidated.
It also works in reverse. The Inverse Head and Shoulders pattern often marks the end of a downtrend and signals a possible reversal to the upside. The logic and rules are the same, just flipped 🔄