What is Head & Shoulders?
Head & Shoulders is a core concept in currency trading.
A classic technical reversal chart formation featuring three peaks: a higher peak (head) flanked by two lower peaks (shoulders) above a neckline support.
Understanding Head & Shoulders helps you manage your risk and spot high-probability trade setups.
Why It Matters for Forex Traders
In forex trading, Head & Shoulders helps you protect your capital. It gives you a clear rule to follow instead of guessing.
How to Identify and Apply Head & Shoulders
- 1Spot and mark Head & Shoulders on your chart during active trading hours.
- 2Check that the overall market trend agrees with your trade idea.
- 3Always place a protective stop loss before entering any position.
Practical Forex Example
For example, on a EUR/USD trade, applying Head & Shoulders allows you to set clear entry and exit points before risking real money.
PRO TRADER TIP
Always test strategies involving Head & Shoulders on a free demo account first before trading with real capital.