 |
| Image: Moneybestpal.com |
The head and shoulders pattern is a negative reversal pattern in technical analysis of financial markets that often denotes a trend reversal from bullish to bearish. The pattern appears when the price of an asset reaches three peaks, with the center peak being the highest and the two outer peaks being roughly equal in height.Â
The two outer peaks are referred to as the shoulders, while the center peak is referred to as the head.
The pattern's visual resemblance to a person's head and shoulders—the head being the central peak and the shoulders being the two outside peaks—led to its naming. By linking the lows between the left and right shoulders, a line is drawn to create the pattern's neckline. whenever the
In technical analysis, the head and shoulders pattern is one of the most dependable and well-known chart patterns. It is used by traders and investors to spot possible trend reversals and to decide when to enter and exit trades. The pattern is not always a reliable predictor, and false signals might happen, it should be highlighted. Consequently, it is crucial to combine the head and shoulders pattern with additional technical and fundamental analysis tools in order to make wise trading decisions.
The pattern's visual resemblance to a person's head and shoulders—the head being the central peak and the shoulders being the two outside peaks—led to its naming. By linking the lows between the left and right shoulders, a line is drawn to create the pattern's neckline. whenever the
In technical analysis, the head and shoulders pattern is one of the most dependable and well-known chart patterns. It is used by traders and investors to spot possible trend reversals and to decide when to enter and exit trades. The pattern is not always a reliable predictor, and false signals might happen, it should be highlighted. Consequently, it is crucial to combine the head and shoulders pattern with additional technical and fundamental analysis tools in order to make wise trading decisions.
