Forex glossary
Head and Shoulders
Head and Shoulders consists of three peaks after an advance, with the middle highest and a neckline joining the intervening troughs. Breaking that line completes the classic bearish reversal pattern. The inverse version uses troughs. A height projection supplies a conventional target rather than an established outcome.
Illustrative example
How does it work in practice?
Assume shoulders at 108 and 109, a head at 115 and a horizontal neckline at 103. Breaking 103 completes the structure; its twelve-unit height gives a conventional projection to 91.
A case to work through
A line through the wrong points
Hypothetically, shoulders are 108 and 109, the head 116 and the intervening troughs 101 and 103.
- The neckline passes through 101 and 103, so it slopes.
- Joining 108 and 109 creates a different line and the wrong completion condition.
What follows? Check a break of the correct neckline at the examined bar's time.
Example boundary: A sloping line's value depends on time; the structure does not guarantee a decline.
A useful distinction
Head and Shoulders / Double Top
Head and Shoulders has three peaks with the middle highest; a double top has two similar peaks.
Check your understanding
Select the correct neckline points.
Show the answer and explanation
101 and 103
They are the troughs between peaks.
Geometry and pattern completion
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Related terms
Sources and documentation
- StockCharts – Head and Shoulders
The highest central peak and neckline joining intervening troughs.
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