The Head and Shoulder Chart Pattern is a price reversal pattern that helps traders identify when a reversal may come in the market.
Whenever you see the head and shoulders pattern in the market. At the same time you should understand two things.
First – If you have made any position in the market, then you should book your profit because from here the market can turn.
Second – You should be ready to take a new position in the market
Head and Shoulder Chart Pattern
You will see an uptrend before a head and shoulders pattern is formed. This means that now reversal can be seen in the market. In this you will see two shoulders and a head.
The head will always be above both the shoulders. Both the shoulders can be seen above or below each other. In this way you can identify the head and shoulders in the chart.
Trade Setup – Head and Shoulder Pattern
With the help of head and shoulders, you have to wait for the breakdown of the neckline to make a position in the market.
As soon as a candle closes below giving a breakdown of the neckline. Similarly, on the next candle, you can make your position in the market.
If we talk about stop loss, then you can place your stop loss above the high of the candle giving the breakdown of neckline.
On the other hand, if we talk about the target, then you can take the target of as many points as the points are from the neckline to the head.
Example 1 – Head and Shoulder Pattern
The head and shoulders pattern is explained in these examples. Hope you like the information given by us.
Example 2 – Head and Shoulder Pattern
- Bearish Engulfing Candlestick Pattern
- Bullish Engulfing Candlestick Pattern
- Dark Cloud Cover Candlestick Pattern
- Piercing Line Candlestick Pattern
- Hanging Man Candlestick Pattern