Visual Representation
The Head and Shoulders Top Chart Pattern consists of a left shoulder, a head, along with a right shoulder. The Neckline will be the line that is connecting both lows of the formation also called valleys. The neckline can often be formed as a double bottom, nevertheless the price-levels of the two lows can even be different. We would know this as an up-sloping or down-sloping neckline. Head and Shoulders
Psychological Movements
The left shoulder is created after an extensive turn to the upside. Bears then push the price down forming the very first valley. The Bulls take over again, reaching a higher high in the market, forming the pinnacle. The Bears steer clear of the move and push the price down to form the second valley. The best shoulder is shaped when price rises again but remains below the high of the head. In a last move costs are pushed down with higher pressure of the Bears lastly breaks the neckline to the downside. Head and Shoulders
Trade Management
We enter a trade, once the Head and Shoulders Top Pattern has completed and value closes below the neckline. The stop loss rests above the right shoulder. The gain target for the pattern equals the range from the head to the neckline.
One Note
In your Trading the up-sloping Head and Shoulders Top Chart Pattern outperforms the double bottom or down sloping Head and Shoulders Chart Pattern.