Head and shoulder pattern forex

It is formed by a peak shoulder , followed by a higher peak head , and then another lower peak shoulder. The slope of this line can either be up or down.

How To Trade The Head And Shoulders Pattern

Typically, when the slope is down, it produces a more reliable signal. The head is the second peak and is the highest point in the pattern. The two shoulders also form peaks but do not exceed the height of the head. We can also calculate a target by measuring the high point of the head to the neckline.

This distance is approximately how far the price will move after it breaks the neckline. You can see that once the price goes below the neckline it makes a move that is at least the size of the distance between the head and the neckline.

Chart Basics (Head and Shoulders)

The name speaks for itself. A valley is formed shoulder , followed by an even lower valley head , and then another higher valley shoulder.

These formations occur after extended downward movements.

With this formation, we would place a long entry order above the neckline. Measure the distance between the head and the neckline, and that is approximately the distance that the price will move after it breaks the neckline. If your target is hit, then be happy with your profits.

However, there are trade management techniques where you can lock in some of your profits and still keep your trade open in case the price continues to move your way. We introduce people to the world of currency trading, and provide educational content to help them learn how to become profitable traders.

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Head and Shoulders Pattern - Trading the forex H&S patterns

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