How Do I Trade Head & Shoulders Chart Pattern?

How to Trade the Head & Shoulders Chart Setup

Head & Shoulders Pattern

Head & Shoulders Pattern is a reversal chart pattern that forms after an extended Gold Trading up-ward trend.

Head & Shoulders Chart Pattern is made up of 3 consecutive peaks, the left shoulder, the head & the right shoulder with 2 moderate troughs between the two shoulders.

This Head & Shoulders Chart Pattern is considered complete once price penetrates and moves below the neck line, which is drawn by joining the two troughs between the shoulders setup.

To open a sell trade after this reversal signal, traders place their sell stop xauusd trade orders just below neck line.

Summary:

• This Head & Shoulders Pattern forms after an extended move upward - gold upwards trend
• This Head & Shoulders Chart Pattern formation indicates that there will be a reversal in the market
• This Head & Shoulders Chart Pattern formation looks like a head with shoulders thus its name.
• To draw the neck-line we use chart point 1 and point 2 as illustrated on the examples illustrated and described below. We also extend this line in both directions.
• We sell when the price breaks-out below neck-line: as described on the example shown & described below.

Trade Head & Shoulders Chart Setup?

Or the head & shoulders chart pattern can also form on a slanting neck line, like the example shown & described below:

Trade Head & Shoulders Chart Setup?

Examples of Head & Shoulders Pattern on a Chart

How to Trade the Head & Shoulders Chart Setup

This Head & Shoulders Chart Pattern can also be formed on a slanting neckline, like the head & shoulders setup examples above, the neck line does not have to be necessarily horizontal.