How to Trade Head and Shoulders Pattern in Forex Market
Master the Head and Shoulders Pattern for Forex Profits
The Head and Shoulders pattern is a game-changing reversal signal, spotting trend shifts with precision. After seven years of trading and millions in profits, I’ve used this pattern with Price Action Trading to generate $1,000–$1,500 weekly in the $6.3 trillion Forex market. In this guide, I’ll explain how to identify the Head and Shoulders and its Inverted counterpart, trade them effectively, and share a real trade example to show it in action.
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1. What is the Head and Shoulders Pattern?
The Head and Shoulders is a reversal candlestick pattern that signals a bullish trend’s end, indicating a shift to a bearish trend when formed at a market high.
Key Characteristics:
Structure: Consists of three peaks: left shoulder (market structure point), head (higher high), and right shoulder (lower high). It forms at a resistance level with 3+ rejections.
Signal: Indicates the market is no longer bullish and will reverse downward. Avoid buying when this pattern appears.
Market Structure: Built from market structure points (peaks or “elbows”) and candlestick patterns, combining price action for confirmation.
Think of it like a surfer spotting a wave’s crevice—when you see this pattern, it’s time to ride the reversal.
2. The Inverted Head and Shoulders: A Bullish Reversal
The Inverted Head and Shoulders is the opposite, signaling a bearish trend’s end and a bullish shift when formed at a market low.
How to Identify:
Structure: Consists of three troughs: left shoulder (market structure point), head (lower low), and right shoulder (higher low). It forms at a support level with 3+ rejections.
Signal: Indicates a reversal to the upside, signaling buy opportunities.
TradingView Setup: Mark troughs as market structure points (e.g., label “HL,” “LL,” “HL”).
These patterns repeat across timeframes, but higher timeframes (daily/weekly) are more reliable, like bigger waves offering longer rides.
3. How to Identify the Head and Shoulders Pattern
Spotting the Head and Shoulders or Inverted Head and Shoulders involves marking market structure points on TradingView and confirming with candlestick patterns.
Identification Steps:
Head and Shoulders: Look for a bullish trend (higher highs/lows) nearing exhaustion. Mark the left shoulder (peak), head (higher high), and right shoulder (lower high) at a resistance level with 3+ rejections. Confirm with a bearish candlestick (e.g., bearish engulfing) at the right shoulder.
Inverted Head and Shoulders: Identify a bearish trend (lower lows/highs) bottoming out. Mark the left shoulder (trough), head (lower low), and right shoulder (higher low) at a support level with 3+ rejections. Confirm with a bullish candlestick.
Wave Analogy: Like spotting a wave’s peak (head) and troughs (shoulders) before it hits the shore, these patterns signal a trend’s turning point.
I chased bullish trends into losses early on. Spotting Head and Shoulders taught me to catch reversals.
4. Trading the Head and Shoulders Pattern
Trade the Head and Shoulders pattern using Price Action, aligning with market structure, confirming at areas of interest, and trading during high-volume sessions.
Trading Tips:
Confirm the Pattern: Ensure the Head and Shoulders forms at a resistance level (or support for Inverted) with 3+ rejections, backed by a candlestick pattern (e.g., bearish engulfing).
Align with Market Structure: Verify the trend via top-down analysis (weekly to 2-hour charts). For Head and Shoulders, confirm a bullish trend (higher highs/lows) shifting to bearish (lower lows/highs).
Set Stop-Loss/Take-Profit: Place stop-losses 5–10 pips above the head (for Head and Shoulders) or below the head (Inverted). Set take-profits at the next support/resistance for a 1:2 risk-reward ratio.
Trade London/New York Sessions: High volume (3:00 AM–12:00 PM EST) ensures low spreads and momentum.
Manage Psychology: Avoid FOMO by waiting for confirmed patterns, trusting their reliability like a surfer trusts a wave.
Trading without patterns cost me thousands. The Head and Shoulders became my edge, delivering wins like $110,000 in a single day.
5. Real Trade Example: EUR/GBP Head and Shoulders Trade
Here’s a Price Action trade I took using a Head and Shoulders pattern during the London session, generating $336 in 7 minutes:
Trade: Sell EUR/GBP on a 2-hour timeframe at the London session open (3:00 AM EST).
Setup: Daily chart confirmed a bullish trend (higher highs/lows) nearing exhaustion via top-down analysis. A resistance level (area of interest) with 3+ rejections formed, marked as a lower high (LH). A Head and Shoulders pattern (left shoulder, head, right shoulder) completed on the 2-hour chart, with a bearish engulfing candlestick at the right shoulder confirming the reversal.
Entry: Used TradingView’s short position tool on a $5,000 demo account (1:50 leverage). Risked 2% ($100) with a 15-pip stop-loss (5 pips above the head) via MyFXBook’s position size calculator (0.53 lots). Take-profit set at the next support (30 pips) for a 1:2 risk-reward. Spread was 3 pips due to high-volume session.
Psychology: Stayed disciplined, avoiding FOMO by trading only after the confirmed Head and Shoulders pattern, trusting the reversal signal.
Result: Profited $336 on MetaTrader 4, closed manually to demonstrate, shared live with my community. No slippage occurred.
Profit Screenshots: My students see results like $1,000, $2,000, even $10,000 weekly with this pattern. Join my course to access these setups!
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Final Thoughts
The Head and Shoulders pattern is a powerful tool for spotting reversals, helping you generate $1,000–$1,500 weekly in Forex. Follow these principles to succeed:
Identify the Pattern: Spot Head and Shoulders at resistance (bearish reversal) or Inverted at support (bullish reversal) with 3+ rejections.
Use Price Action: Confirm with candlestick patterns and market structure (bullish or bearish trends).
Prioritize Higher Timeframes: Daily/weekly patterns are more reliable than lower timeframe signals.
Trade London/New York: High volume ensures low spreads and momentum.
Stay Disciplined: Maintain a 1:2 risk-reward ratio and 1–2% risk per trade, avoiding FOMO.
Ready to trade like a pro? Join my 5-Day Trading Mini-Course to learn my Head and Shoulders-based Price Action strategy and trade with a community generating massive profits weekly.
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