Trade Gold Trading

Reversal Patterns: Head & Shoulders and Reverse Head Shoulders

Head & shoulders Trading Pattern

This is a reversal chart pattern that forms after an extended upward trend. It's made up of 3 consecutive peaks, the left shoulder, the head & the right shoulder with two moderate troughs between the shoulders.

This pattern is considered complete once price penetrates & moves below the neck line, which is plotted by joining and connecting the 2 troughs between the shoulders pattern.

To go short, traders place their sell stop trade orders just below neck-line.

Summary:

  • This Gold pattern setup formation forms after an extended move upwards
  • This setup reflects that there'll be a reversal in the market
  • This setup resembles and looks like head with shoulders thus its title.
  • To draw the neck-line we use chart point 1 & point 2 like illustrated below. We also extend the line in both directions.
  • We sell when price breaks-out below the neckline point: see the chart below for an explanation.

How to Read Reverse Head and Shoulders Patterns

Or the head & shoulders also can form on a sloping neck-line, such as the example shown & described below:

Reversal Chart Setups: Head & Shoulders Pattern & Reverse/Inverse Head & Shoulders Setup

Example of Head & Shoulders Chart Pattern on Chart

Reversal Chart Trading Patterns: Head & Shoulders Pattern and Reverse Head and Shoulders Setup

Head & Shoulders Chart Pattern

This chart setup can also be formed on a sloping neck line, like the one above, the neck-line doesn't have to be necessarily horizontal.

Reverse Head & Shoulders Trading Pattern

This is a reversal head & shoulders pattern that forms after an extended downward trend. It resembles an up-side down head shoulders.

This pattern is considered complete once price penetrates above neck line, which is drawn by joining and connecting these 2 peaks between the reverse shoulder pattern.

To go long buyers place their buy stop trade orders just above neckline.

Summary:

  • This Gold setup forms after an extended move downwards
  • This pattern reflects that there will be a reversal in the market
  • This setup resembles and looks like upside down, thus the title Reverse.
  • We buy when the price breaks out above neck line point: see the chart below for an explanation.

Reversal Chart Setups: Head & Shoulders Chart Pattern and Reverse Head & Shoulders Pattern

Example of Reverse Head & Shoulders Chart Pattern on a Chart

Reversal Chart Trading Setups: Head & Shoulders Pattern and Reverse Head and Shoulders Setup

Example of Reverse Head & Shoulders Chart Pattern

More Tutorials:

Forex Traders Seminar Gala

Forex Traders Seminar

Gold Broker