{"id":9630,"date":"2022-10-12T08:24:36","date_gmt":"2022-10-12T08:24:36","guid":{"rendered":"https:\/\/mdr.foobrdigital.com\/?p=9630"},"modified":"2022-10-12T08:24:36","modified_gmt":"2022-10-12T08:24:36","slug":"how-to-trade-the-head-and-shoulders-pattern","status":"publish","type":"post","link":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/2022\/10\/12\/how-to-trade-the-head-and-shoulders-pattern\/","title":{"rendered":"How to Trade the Head and Shoulders Pattern"},"content":{"rendered":"\n

The\u00a0head and shoulders chart pattern<\/strong>\u00a0is a reversal pattern and most often seen in\u00a0uptrends.<\/p>\n\n\n\n

Not only is \u201chead and shoulders\u201d known for trend reversals, but it\u2019s also known for dandruff reversals as well. ?<\/p>\n\n\n\n

In this lesson, we\u2019ll stick to talking about trend reversals and leave the topic of dandruff for another time.<\/p>\n\n\n\n

Head and Shoulders<\/h2>\n\n\n\n

A head and shoulders pattern is also a trend reversal formation.<\/p>\n\n\n\n

It is formed by a peak<\/strong> (shoulder), followed by a higher peak<\/strong> (head), and then another lower peak<\/strong> (shoulder).<\/p>\n\n\n\n

A \u201cneckline<\/strong>\u201d is drawn by connecting the lowest points of the two troughs.<\/p>\n\n\n\n

The slope of this line can either be up or down. Typically, when the slope is down, it produces a more reliable signal.<\/p>\n\n\n\n

\"Head<\/figure>\n\n\n\n

In this example, we can easily see the head and shoulders pattern.<\/p>\n\n\n\n

The head is the second peak and is the highest point in the pattern. The two shoulders also form peaks but do not exceed the height of the head.<\/p>\n\n\n\n

With this formation, we put an entry order below the neckline.<\/p>\n\n\n\n

We can also calculate a target by measuring the high point of the head to the neckline.<\/p>\n\n\n\n

This distance is approximately how far the price will move after it breaks the neckline.<\/p>\n\n\n\n

\"Head<\/figure>\n\n\n\n

You can see that once the price goes below the neckline it makes a move that is at least the size of the distance between the head and the neckline.<\/p>\n\n\n\n

We know you\u2019re thinking to yourself, \u201cthe price kept moving even after it reached the target.\u201d<\/p>\n\n\n\n

And our response is, \u201cDON\u2019T BE GREEDY!<\/strong>\u201d<\/p>\n\n\n\n

Inverse Head and Shoulders<\/h2>\n\n\n\n

The name speaks for itself. It is basically a head and shoulders formation, except this time it\u2019s upside down<\/strong>. ?<\/p>\n\n\n\n

A valley<\/strong> is formed (shoulder), followed by an even lower valley<\/strong> (head), and then another higher valley<\/strong> (shoulder).<\/p>\n\n\n\n

These formations occur after extended downward movements.<\/p>\n\n\n\n

\"Inverse<\/figure>\n\n\n\n

Here you can see that this is just like a head and shoulders pattern, but it\u2019s flipped upside down.<\/p>\n\n\n\n

With this formation, we would place a long entry order above the neckline.<\/p>\n\n\n\n

Our target is calculated just like the head and shoulders pattern.<\/p>\n\n\n\n

Measure the distance between the head and the neckline<\/strong>, and that is approximately the distance that the price will move after it breaks the neckline.<\/p>\n\n\n\n

\"Inverse<\/figure>\n\n\n\n

You can see that the price moved up nicely after it broke the neckline.<\/p>\n\n\n\n

If your target is hit, then be happy with your profits.<\/p>\n\n\n\n

However, there are trade management techniques where you can lock in some of your profits and still keep your trade open in case the price continues to move your way.<\/p>\n","protected":false},"excerpt":{"rendered":"

The\u00a0head and shoulders chart pattern\u00a0is a reversal pattern and most often seen in\u00a0uptrends. Not only is \u201chead and shoulders\u201d known for trend reversals, but it\u2019s also known for dandruff reversals as well. ? In this lesson, we\u2019ll stick to talking about trend reversals and leave the topic of dandruff for another time. Head and Shoulders A […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[807],"tags":[],"_links":{"self":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/9630"}],"collection":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/comments?post=9630"}],"version-history":[{"count":0,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/9630\/revisions"}],"wp:attachment":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/media?parent=9630"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/categories?post=9630"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/tags?post=9630"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}