Head and shoulders
A three-peak structure with a higher centre peak and a neckline.
What to look for
- Left shoulder, higher head and lower right shoulder
- Two intervening troughs define the neckline
- Symmetry tolerance is explicit
A left shoulder, higher head and lower right shoulder form from completed swings. The two pullback lows create a sloping neckline that price breaks later.
For the inverse version, look for a lower head between two higher shoulders and wait for a completed close above the neckline.When the pattern is confirmed
A close beyond the neckline, optionally followed by a retest.
Where the idea is wrong
A recovery above the right shoulder or head, depending on the chosen entry.
The easy mistake
Subjective geometry makes the pattern easy to see after the outcome.
A complete head and shoulders example
Start after a clearly defined trend and build the left shoulder, higher head, lower right shoulder and neckline from objective swings. Fix acceptable shoulder symmetry and neckline slope before searching.
First rule to test
Neckline close — enter no earlier than a complete close through the frozen neckline after the right shoulder.
Alternative rule
Neckline retest — wait for the confirmed break to revisit the neckline and reject it before entering.
Place it where the pattern is wrong
Place the example stop one fixed ATR fraction beyond the right-shoulder extreme, and reject any candidate whose stop rule would instead require changing to the head.
Context, trigger and risk
The pattern handles timing. The other tools decide whether the location makes sense and how far normal price movement can reach.
Defines the three peaks, intervening troughs and confirmation point.
Sets symmetry tolerances and the stop buffer across different prices.
Provides an optional, separately tested momentum comparison across the head and shoulder.
First exit to test
Measured height — project the head-to-neckline distance from the confirmation point.
Alternative exit
Trailing structure — exit when a completed swing breaks against the post-neckline move.
Patterns need a method around them
Open a related strategy to see the wider market filter, entry, stop, exit and no-trade rule.
RSI divergence reversal
Tests whether a mismatch between price and RSI swings adds value after exhaustion.
- ENTRY
- Enter next bar open after price closes beyond the highest high of the five bars ending at the confirmed second low for bullish divergence; mirror below the five-bar low for bearish divergence.
- STOP
- Stop is 0.20 × ATR(14) beyond the second price pivot. Risk 0.50% of equity and round down to 0.01 lot.
- EXIT
- Take profit at 2R. Exit at market after 20 completed H4 bars if neither stop nor target has traded.
Support and resistance rejection
A framework for testing reactions at levels that genuinely predate the trade.
- ENTRY
- Enter at the next H1 open after the first qualifying rejection close back above the prior-day low or below the prior-day high.
- STOP
- Place stop 0.20 × ATR beyond the rejection candle extreme. Risk 0.50% of equity and round down to 0.01 lot.
- EXIT
- Take profit at 2R. Exit after 12 completed H1 bars if neither stop nor target trades.
Multi-timeframe continuation
Aligns a higher-timeframe state with a lower-timeframe trigger without peeking into unfinished bars.
- ENTRY
- Enter at the next M15 open after a candle closes back across EMA(20) in the H4 direction and beyond the prior M15 candle high/low.
- STOP
- Place stop 0.25 × M15 ATR(14) beyond the pullback extreme; risk 0.35% of equity and round down to 0.01 lot.
- EXIT
- Take profit at 2R. Exit early only when a completed M15 candle closes through the stop-side pullback extreme; close unresolved trades after 24 M15 bars.
Try it on older charts
Encode swing detection first, then lock tolerance before classification.