Head & Shoulders Chart Pattern — How to Spot and Trade It

Three peaks: a higher middle peak (head) between two lower peaks (shoulders).

In plain words

Someone climbing a hill three times — the middle climb is highest, then they walk downhill.

What the classic books say

The Head & Shoulders is a reversal pattern with reference reliability High and illustrative behaviour of ~70% after a confirmed neckline break (the kind of statistics catalogued in Bulkowski's encyclopedic pattern studies and Murphy's technical-analysis classic). One of the most reliable reversal patterns when fully formed.

Level by level

Beginner

Buyers tried three times; the middle try was strongest, but they failed and sellers took over.

Intermediate

A failed higher high (head) followed by a lower peak signals demand exhaustion; the neckline break confirms it.

Advanced

A classic distribution top; the neckline break with volume and a weak retest validate the reversal.

Trade plan (educational template)

• Entry: On a close below the neckline.
• Stop-loss: Above the right shoulder.
• Target: Head-to-neckline height projected down from the neckline.
• Check the numbers with the Risk-Reward calculator before any entry.

Common beginner mistakes

• Calling it before the neckline breaks
• Ignoring the volume profile

Practise it now

• ▶ Draw the Head & Shoulders with live trendlines and a ghost forecast
• 📖 Full lesson in the Learning Hub

_Educational content only — not financial advice. Historical behaviour never guarantees future results._