How to Plot Head & Shoulders Pattern on TradingViewWelcome back, Traders!
We’re excited to have you here on TradingView where we share valuable trading insights and educational posts to help you succeed in the markets. Today, we’re diving into one of the most reliable chart patterns in technical analysis: the Head and Shoulders pattern. Understanding and identifying this pattern can significantly improve your trading strategy, whether you’re dealing with forex, stocks, or commodities.
What is the Head and Shoulders Pattern?
The Head and Shoulders pattern is a bearish reversal pattern that indicates a potential end to an uptrend and the beginning of a downtrend. It consists of three peaks:
Left Shoulder: The first peak followed by a decline.
Head: The highest peak followed by a decline.
Right Shoulder: A peak similar in height to the left shoulder, followed by a decline.
The neckline is the support line that connects the lows after the left shoulder and the head.
How to Trade the Head and Shoulders Pattern:
Identify the Pattern: Look for the three distinct peaks with the head being the highest.
Draw the Neckline: Connect the lows after the left shoulder and the head to form the neckline.
Entry Point: Enter a short position when the price breaks below the neckline.
Target: Measure the distance from the head to the neckline and subtract this distance from the breakout point to set your target.
Stop Loss: Place a stop loss above the right shoulder to manage your risk.
Inverse Head and Shoulders Pattern
Conversely, the Inverse Head and Shoulders is a bullish reversal pattern signaling the end of a downtrend and the start of an uptrend. It consists of three troughs:
Left Shoulder: The first trough followed by a rise.
Head: The lowest trough followed by a rise.
Right Shoulder: A trough similar in depth to the left shoulder, followed by a rise.
The neckline is the resistance line connecting the highs after the left shoulder and the head.
How to Trade the Inverse Head and Shoulders Pattern:
Identify the Pattern: Look for the three distinct troughs with the head being the lowest.
Draw the Neckline: Connect the highs after the left shoulder and the head to form the neckline.
Entry Point: Enter a long position when the price breaks above the neckline.
Target: Measure the distance from the head to the neckline and add this distance to the breakout point to set your target.
Stop Loss: Place a stop loss below the right shoulder to manage your risk.
Follow us on TradingView for more helpful ideas and educational posts!
Stay tuned as we continue to share insights that will help you on your trading journey. Happy trading! - BK Trading Academy
Headandshouldersformation
How To Spot A Reversal Like a Pro!Hello Traders,
Spotting a reversal is always a daunting task I know. That is I use a 2 Step Down Timeframe Method to spot a reversal in correct way. I have explained step by step so please watch in full to understand it clearly. Also do not forget to like the video and let me know in the comment section if you have nay questions.
How to Find Legitimate Head and Shoulder PatternsHey Guys!
I just wanted to post a quick tutorial on how to find legitimate Head and Shoulder patterns.
In this lesson, I explain the 5 rules that a Head and Shoulders pattern must abide for it to be legitimate.
Here's the rules:
#1 Both necklines must be parallel.
#2 The main neckline cannot be broken out of surpassed before the right shoulder's price level is reached.
#3 The Head and Shoulders must be relatively flat.
#4 The top neckline can only be adjusted to a wick between the main pivot and the last correlating major pivot.
#5 The prior trend must be in the opposing direction. (which is up in the case of a "short" Head and Shoulders Pattern )
That's it! I hope this helps!
Have a great day!
Ken
