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What is a Head and Shoulders Pattern?

Quick Answer: Head and shoulders is a reversal chart pattern with three peaks - a higher peak (head) between two lower peaks (shoulders). It signals trend reversal when the neckline breaks.

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What is a Head and Shoulders Pattern?

The head and shoulders pattern is a reversal formation marked by three peaks: a higher middle peak (the head) between two lower peaks (the shoulders). A neckline connects the interim lows and acts as the trigger line.

Head and Shoulders Top

Bearish reversal pattern at market tops

Head and Shoulders Top PatternA bearish reversal chart pattern showing three peaks (or troughs) where the middle one is higher (or lower) than the other two, forming a head between two shoulders. The neckline connects the lows (or highs) and a break signals the reversal.LeftShoulderHeadRightShoulderNecklineBreakdownTarget
Key Characteristics:
  • Three peaks/troughs: left shoulder, head, right shoulder
  • Head is higher than both shoulders
  • Shoulders roughly equal in height
  • Neckline drawn through lows
  • Confirmation on neckline break with volume

Price Target:

Measure from head to neckline, project same distance from neckline breakout point

What This Pattern Shows:

After an uptrend, buyers make progressively weaker attempts to push higher. The left shoulder shows initial weakness, the head is a final push that fails to sustain, and the right shoulder confirms exhaustion. When price breaks the neckline, it signals sellers have taken control and a downtrend is likely.

Trading Guidelines:
  • • Wait for neckline break with increased volume
  • • Entry on pullback to neckline (now support/resistance)
  • • Stop loss above/below right shoulder
  • • Target: distance from head to neckline projected from break
  • • Pattern takes weeks to form - be patient

Key Components

  • Left shoulder: A rally followed by a pullback that sets the first neckline pivot.
  • Head: A higher high that fails to attract follow-through buying.
  • Right shoulder: A lower high that shows buyers are running out of strength.
  • Neckline: Support connecting the two swing lows; a break signals confirmation.

Measuring the Target

Measure the distance from the neckline to the head's peak. Project that distance from the neckline break to estimate the minimum move, then adapt the target to higher timeframe levels.

Trading Guidelines

  • Wait for a decisive close below the neckline (or above it in an inverse pattern) before entering.
  • Check volume or momentum oscillators for confirmation of waning demand.
  • Hide stop losses above the right shoulder to invalidate the pattern if price recovers.
  • Scale out at interim support levels and trail the remainder in case the reversal accelerates.

Deep Dive

Most edges come from applying clear rules consistently. Expand your analysis beyond a single signal: add context from higher timeframes, recent volatility, session behavior, and catalysts. Define invalidation so a trade becomes obviously wrong fast, keeping losses small while letting winners compound.

Trader Checklist

  • Higher‑timeframe bias aligns with the setup.
  • Clear level or zone for entry with confluence.
  • Pre‑defined stop beyond structure; 2–3R target.
  • Session/liquidity supports follow‑through.
  • No imminent high‑impact news unless planned.

Strategy Ideas

  • Combine structure with momentum confirmation (break/close/acceptance).
  • Use partials: scale out at first target; trail remainder.
  • Journal results by session and pair to refine timing.

Risks and Limitations

  • Thin liquidity widens spreads and distorts signals.
  • False breaks around obvious levels—wait for acceptance.
  • Overfitting indicators; keep the process simple and robust.

Example

Map bias on the daily chart, mark a zone, and wait on 1H for a close back above with rising participation. Enter on the retest; stop beyond the invalidation wick; target prior swing with room for extension. Record the outcome and context to iterate.

Related Terms

Chart PatternsDouble TopTechnical Analysis

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