Head and Shoulder Pattern - How to Trade the Head & Shoulder Chart Pattern for Trend Reversal

Head and Shoulder Pattern – Head and Shoulder pattern consist of left shoulder, a head and a right shoulder. "Head and shoulder" is a bearish pattern and symbol of trend reversal from up trend to down trend.

• At the left shoulder there is a small correction, and it takes support on a line.
• Then a head is form with heavy volume and take support at the same neckline. (Even price fallen the lower of neckline)
• Finally right shoulder is formed that pick is lower than head peak.

Initiate the Trade

• Entry - When right shoulder break down the neckline, it's the confirmation of pattern and we can enter the short sell position.
• Stop loss - The stop loss should be placed above the right shoulder or 5% of prices whichever is less.
• Target - Target is the same distance from the head pick to neckline

Note: many head and shoulder patterns can also consist multiple shoulder and neckline might be sloping little up or down of neckline

Inverted Head and Shoulder Pattern

Inverted head and shoulder is an inverse of head and shoulder, Inverted head and shoulder is a bullish pattern and we can initiate long position at the breaching point of neckline

Initiate the Trade

• Entry - When right shoulder break up the neckline, it’s the confirmation of pattern and we can enter the long position.
• Stop loss - The stop loss should be placed below the right shoulder or 5% of prices whichever is less.
• Target - Target is the same distance from the pick ofhead to neckline