The Head And Shoulders Pattern in Use
The Head and Shoulders pattern consists of three peaks: a middle, higher peak called the “head,” which is flanked by two lower peaks called the “shoulders. Through reading the trends and price rises through these three peaks, you are able to see when a price breaks and then if an uptrend has ended and if a downtrend is beginning.
The Head and Shoulders pattern reflects a battle between buyers and sellers. In the basic, standard pattern, the initial rally (left shoulder) shows bullish momentum, and the inverse Head and Shoulders pattern indicates a bearish momentum. Traders sometimes look for confirmation before entering a trade based on the Head and Shoulders pattern’s results, the confirmation comes when there is a price break through a neckline.
The pattern is a stable and reliable pattern that can give traders a potential target for where the price might move after the pattern completes. Stop-loss orders are often placed above the right shoulder (for a bearish pattern) or below it (for a bullish pattern) to manage risk.
On this course, you will learn everything about the Head and Shoulders pattern. You will learn how to read the three peaks, how to see the uptrends changing, and how to best plan your next trading move based on its information. You will find out how to check for false breakouts in volatile markets and how to confirm the pattern’s findings with other analysis tools such as volume, moving averages, RSI (Relative Strength Index), or MACD (Moving Average Convergence Divergence).
In addition, you will find out how to identify potential reversals and how to set entry and exit points based on this. You’ll learn why traders enter positions when the price breaks and how to set a profit target, and also why stop-loss orders are usually placed above the right shoulder in the bearish pattern. You will learn all of these tricks and more, which will give you an edge and another tool in your pocket as you climb the Forex ladder and continue on your market trading journey to success.
