The Head and Shoulders Pattern in trading. How to trade a reverse pattern like a Pro?
The head and shoulders is a popular pattern in technical analysis and is often used by traders in the forex, cryptocurrencies, stocks, and futures markets. The pattern is quite remarkable because it helps to determine market reversals with relatively high accuracy.
In 2002 Thomas Bulkowski analyzed 431 head and shoulders patterns on daily charts of 500 stocks from 1991 to 1996. Only 7% of the head and shoulder patterns he identified were not accompanied by a price decline, the average price decline was 23% and lasted around three months.
In this article you will find out:
- How does the head and shoulders pattern look on a chart?
- What does it mean?
- How to trade?
- Advantages and disadvantages
- How can you use the head and shoulders pattern to improve your trading?
This article has a great number of chart examples.