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The Head and Shoulders (H&N) Pattern & It's Use

The head and shoulders pattern is a common technical analysis pattern that is often seen in the stock market. It is considered a bearish reversal pattern, which means that it is typically found at the top of an uptrend and signals that the trend is about to reverse and head downward.

This pattern is made up of four main parts: the left shoulder, the head, the right shoulder, and the neckline. The pattern is named for its resemblance to a person's head and shoulders.



The head and shoulders pattern is a popular technical analysis pattern that is used to identify potential reversals in the direction of an asset's price. It is called the head and shoulders pattern because it looks like a head with two shoulders on either side. The pattern is formed when the price of an asset reaches a peak and then falls, only to rise again to a slightly lower peak before falling again. This creates the "head" and the two "shoulders" on either side. The pattern is considered a bearish signal, indicating that the asset's price is likely to continue falling..

To use the head and shoulders pattern in trading, follow these steps:

  • Identify the pattern on a chart by looking for a series of peaks and troughs that form a distinct head and two shoulders.
  • Identify the neckline, which is a line drawn across the lows of the pattern.


  • Wait for the price to break below the neckline, which is a signal that the trend is reversing and the price is likely to fall.
  • Enter a short position at the break of the neckline, with a stop loss above the right shoulder of the pattern.


  • Set a target price by measuring the distance between the neckline and the head of the pattern and projecting that distance downward from the neckline.

  • Monitor the trade and adjust the stop loss and target as needed based on market conditions and your risk management strategy.
  • Close the trade when the target price is reached or when the market signals that the trend has reversed again.

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