It is no secret that technical analysis plays an integral role in the world of Forex trading. One of the most popular tools is the “head and shoulders” pattern, which is used to predict potential price reversals. In this article, we will explore the anatomy of a head and shoulders pattern, how it is formed, and what types of opportunities it can provide traders. Head and shoulders is a classic chart pattern used in technical analysis that is used to predict reversals in price. The pattern forms when there is a peak followed by a higher peak and then a lower peak, creating an outline that looks like a head and two shoulders. In order for the pattern to be valid, the two outside peaks must be of approximately equal height and the middle peak must be lower than the two outside peaks. If all these criteria are met, this indicates a bearish reversal signal and suggests that the asset’s price might start to decline.
Head and shoulders pattern in technical analysis for Forex Trading
By Lena K. Bradley Dec 28, 2023