British Pound / U.S. DollarEducation
Head and shoulders pattern
Updated
What is the head and shoulders pattern?
⚡️ The head and shoulders model translated from Head and shoulders is a model that represents price fluctuations, predicting future trend reversals. This language is very commonly used in financial investment fields such as stock investment, virtual currency,... From there, this model will help investors make easy buying and selling decisions. easier and more accurate.
⚡️ The head and shoulders appear as a baseline chart along with 3 peaks. Specifically, the two outer peaks will have almost the same height and the middle peak will be the highest. This pattern will show bullish or bearish price movements and vice versa.
⚡️ In stock transactions, the head and shoulders model is used to evaluate the market and stock trends. The head and shoulders pattern gives investors:
⚡️ How to determine the price range to set profit goals and limit future risks.
Conduct effective take-profit order trading based on the shape of the top and bottom of the model's price.
Identify the upward or downward trend of a stock code in the next period thanks to the appearance of a perfect head and shoulders pattern.
Besides these advantages, the head and shoulders model has a biggest disadvantage which is that the price reversal trend is too strong, affecting price fluctuations in the same direction.
Characteristics of the head and shoulders pattern
⚡️The head and shoulders pattern shows a clear upward or downward trend in price. Investors can identify this model through:
- First shoulder (Left Shoulder): An uptrend begins to form with a large trading volume. The left shoulder creates the first peak of the stock price and the market begins to adjust downward, creating a bottom.
- The highest peak in the middle (Head in the middle): Starting from the bottom of the left shoulder, the price will rise again to create a peak and be higher than the peak in the left shoulder. Of course, this time will also be accompanied by a sharp increase in trading volume, lower or equal to the price of the top of the left shoulder. After the peak is created, the price will begin to adjust downward to create a bottom, this bottom will be equal to the first bottom. The neckline will appear when connecting the two bottoms of the left shoulder and the middle head.
- Second shoulder (Right shoulder): This is the time when the stock code is recovering. Starting from the bottom, the price will increase again, creating a peak but only as high as the top of the left shoulder. After that, the price will turn down and break the initial neckline, showing that the price trend will continue to decline.
- Neckline: The neckline acts as support when predicting a bullish or bearish head and shoulders pattern. For investors, the neckline is a resistance level that can be relied upon to make investment decisions.
⚡️A perfect head and shoulders pattern would be one with two equal bottoms and two peaks and a highest peak in the middle. In fact, this model rarely achieves such perfection. Normally, the top of the left shoulder and the right shoulder will not be equal, even the two bottoms will also have a difference.
⚡️ The head and shoulders model translated from Head and shoulders is a model that represents price fluctuations, predicting future trend reversals. This language is very commonly used in financial investment fields such as stock investment, virtual currency,... From there, this model will help investors make easy buying and selling decisions. easier and more accurate.
⚡️ The head and shoulders appear as a baseline chart along with 3 peaks. Specifically, the two outer peaks will have almost the same height and the middle peak will be the highest. This pattern will show bullish or bearish price movements and vice versa.
⚡️ In stock transactions, the head and shoulders model is used to evaluate the market and stock trends. The head and shoulders pattern gives investors:
⚡️ How to determine the price range to set profit goals and limit future risks.
Conduct effective take-profit order trading based on the shape of the top and bottom of the model's price.
Identify the upward or downward trend of a stock code in the next period thanks to the appearance of a perfect head and shoulders pattern.
Besides these advantages, the head and shoulders model has a biggest disadvantage which is that the price reversal trend is too strong, affecting price fluctuations in the same direction.
Characteristics of the head and shoulders pattern
⚡️The head and shoulders pattern shows a clear upward or downward trend in price. Investors can identify this model through:
- First shoulder (Left Shoulder): An uptrend begins to form with a large trading volume. The left shoulder creates the first peak of the stock price and the market begins to adjust downward, creating a bottom.
- The highest peak in the middle (Head in the middle): Starting from the bottom of the left shoulder, the price will rise again to create a peak and be higher than the peak in the left shoulder. Of course, this time will also be accompanied by a sharp increase in trading volume, lower or equal to the price of the top of the left shoulder. After the peak is created, the price will begin to adjust downward to create a bottom, this bottom will be equal to the first bottom. The neckline will appear when connecting the two bottoms of the left shoulder and the middle head.
- Second shoulder (Right shoulder): This is the time when the stock code is recovering. Starting from the bottom, the price will increase again, creating a peak but only as high as the top of the left shoulder. After that, the price will turn down and break the initial neckline, showing that the price trend will continue to decline.
- Neckline: The neckline acts as support when predicting a bullish or bearish head and shoulders pattern. For investors, the neckline is a resistance level that can be relied upon to make investment decisions.
⚡️A perfect head and shoulders pattern would be one with two equal bottoms and two peaks and a highest peak in the middle. In fact, this model rarely achieves such perfection. Normally, the top of the left shoulder and the right shoulder will not be equal, even the two bottoms will also have a difference.
Trade active
Note
⚡️everything is still very good.Trade closed: stop reached
Trade closed: target reached
Note
📣 Inverse Head and Shoulders is one of five strong candlestick reversal patterns that signal early that the price trend will turn from a Downtrend to an Uptrend. If applied correctly, it can help minimize risks and make more accurate predictions, avoiding the trap of false returns.
📊 Structure of the Inverse Head and Shoulders candlestick pattern:
➡️ Left shoulder: Is the first bottom.
➡️Head: After a temporary pullback, creating the first point of the Neckline, the price continues to decrease and creates a new bottom lower than the old bottom and then rebounds to create the second point of the Neckline. When connecting these two points, we will get a complete Neckline.
➡️Right shoulder: After creating the second point of the Neckline, the price continued to decrease, but could not create a new bottom lower than the bottom of the top. Which creates a new bottom, higher than the bottom of the first peak (Higher Low).
➡️Neckline: Is the line connecting the two recovery peaks from Behind the Left Shoulder and Before the Right Shoulder.
Neckline can be horizontal, ascending or descending. Traditionally, if the neckline is ascending, the inverted Head-Shoulders candlestick pattern is considered to have a stronger reversal potential than a descending
Trade active
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.