How Do I Trade Head and Shoulders Chart Pattern?

How to Trade the Head and Shoulders Chart Pattern

Head and Shoulders Trading Pattern

Head and Shoulders Chart Pattern is a reversal chart pattern that forms after an extended Gold Trading upward trend.

Head and Shoulders Chart Pattern is made up of three consecutive peaks, the left shoulder, the head and the right shoulder with two moderate troughs between the two shoulders.

This Head and Shoulders Chart Pattern is considered complete once xauusd price penetrates and moves below the neckline, which is drawn by joining the two troughs between the shoulders pattern.

To open a sell gold trade after this reversal gold trading signal, Gold traders place their sell stop xauusd trade orders just below the neckline.

Summary:

• This Head and Shoulders Chart Pattern forms after an extended move upwards - gold upward trend
• This Head and Shoulders Chart Pattern formation indicates that there will be a reversal in the xauusd market
• This Head and Shoulders Chart Pattern formation resembles a head with shoulders thus its name.
• To draw the neckline we use chart point 1 and point 2 as shown on the xauusd trading example illustrated and explained below. We also extend this line in both directions.
• We sell when price breaks below the neckline: as explained on the xauusd trading example illustrated and explained below.

Gold Trade Head and Shoulders Chart Pattern?

Or the head and shoulders chart pattern can also form on a slanting neckline, like the xauusd trading example illustrated and explained below:

Gold Trade Head and Shoulders Chart Pattern?

Example of Head and Shoulders Gold Pattern on a Gold Chart

How to Trade the Head and Shoulders Chart Pattern

This Head and Shoulders Chart Pattern can also be formed on a slanting neckline, like the head and shoulders trading pattern example above, the neck line does not have to be necessarily horizontal.