How to Trade Inverted Head and Shoulders Pattern in Forex Market
Master the Inverted Head and Shoulders Pattern for Forex Profits
The Inverted Head and Shoulders pattern is a powerful reversal signal, spotting the shift from a bearish to a bullish trend 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 and trade the Inverted Head and Shoulders, compare it to its counterpart, and share a real trade example to bring it to life.
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1. What is the Inverted Head and Shoulders Pattern?
The Inverted Head and Shoulders is a reversal candlestick pattern that signals the end of a bearish trend, indicating a shift to a bullish trend when formed at a market low.
Key Characteristics:
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 the market is no longer bearish and will reverse upward, signaling buy opportunities.
Market Structure: Built from market structure points (troughs or “elbows”) and candlestick patterns, combining price action for confirmation.
Think of it like a surfer spotting a wave’s troughs—when you see this pattern, it’s time to ride the bullish wave.
2. Comparing to the Head and Shoulders Pattern
The Inverted Head and Shoulders is the mirror image of the Head and Shoulders, which signals a bullish-to-bearish reversal at a market high.
Key Differences:
Head and Shoulders: Forms at resistance with three peaks (left shoulder, head, right shoulder), indicating a downward reversal. Avoid buying.
Inverted Head and Shoulders: Forms at support with three troughs (left shoulder, head, right shoulder), indicating an upward reversal. Look for buys.
Shared Traits: Both rely on market structure points and candlestick confirmations, repeating across timeframes (higher timeframes more reliable).
Understanding both patterns gives you an edge in spotting reversals, like a surfer reading wave patterns.
3. How to Identify the Inverted Head and Shoulders Pattern
Spotting the Inverted Head and Shoulders involves marking market structure points on TradingView and confirming with candlestick patterns at support levels.
Identification Steps:
Pattern Formation: Look for 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.
TradingView Setup: Label troughs as market structure points (e.g., “HL” for left shoulder, “LL” for head, “HL” for right shoulder). Confirm with a bullish candlestick (e.g., bullish engulfing) at the right shoulder.
Wave Analogy: Like spotting a wave’s troughs (shoulders and head) before it rises, this pattern signals a bullish turning point.
I missed bullish reversals early on, selling into losses. Spotting Inverted Head and Shoulders taught me to catch uptrends.
4. Trading the Inverted Head and Shoulders Pattern
Trade the Inverted Head and Shoulders 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 Inverted Head and Shoulders forms at a support level with 3+ rejections, backed by a bullish candlestick (e.g., bullish engulfing).
Align with Market Structure: Verify the trend via top-down analysis (weekly to 2-hour charts). Confirm a bearish trend (lower lows/highs) shifting to bullish (higher highs/lows).
Set Stop-Loss/Take-Profit: Place stop-losses 5–10 pips below the head and take-profits at the next 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 Inverted Head and Shoulders became my edge, delivering wins like $110,000 in a single day.
5. Real Trade Example: EUR/GBP Inverted Head and Shoulders Trade
Here’s a Price Action trade I took using an Inverted Head and Shoulders pattern during the London session, generating $336 in 7 minutes:
Trade: Buy EUR/GBP on a 2-hour timeframe at the London session open (3:00 AM EST).
Setup: Daily chart confirmed a bearish trend (lower lows/highs) bottoming out via top-down analysis. A support level (area of interest) with 3+ rejections formed, marked as a higher low (HL). An Inverted Head and Shoulders pattern (left shoulder, head, right shoulder) completed on the 2-hour chart, with a bullish engulfing candlestick at the right shoulder confirming the reversal.
Entry: Used TradingView’s long position tool on a $5,000 demo account (1:50 leverage). Risked 2% ($100) with a 15-pip stop-loss (5 pips below the head) via MyFXBook’s position size calculator (0.53 lots). Take-profit set at the next resistance (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 Inverted Head and Shoulders pattern, trusting the bullish 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 Inverted Head and Shoulders pattern is a reliable tool for spotting bullish reversals, helping you generate $1,000–$1,500 weekly in Forex. Follow these principles to succeed:
Identify the Pattern: Spot Inverted Head and Shoulders at support with 3+ rejections, signaling a bearish-to-bullish reversal.
Use Price Action: Confirm with bullish candlestick patterns and market structure (bearish to bullish 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 Inverted Head and Shoulders-based Price Action strategy and trade with a community generating massive profits weekly.
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