Head and Shoulders Tops and best forex trading signals

Head and Shoulders Tops and the best trading signals

Appearance Three-peak formation with center peak taller than the others.

Shape

After an upward price trend, the formation appears as three
bumps, the center one is the tallest, resembling a bust.
Symmetry

The two shoulders appear at about the same price level.
Distance from the shoulders to the head is approximately the
same. There can be wide variation in the formation’s
appearance, but symmetry is usually a good clue to the
veracity of the formation.
Volume

Highest on the left shoulder, followed by the head. The right
shoulder shows the lowest volume of the three peaks.
Neckline

Connects the lows of the two troughs between the three peaks. The line can slope up or down. Often used as a (to buy or sell) once price pierces the line.

Downward breakout

Once price pierces the neckline, it may pull back briefly, then continue moving down.

signals take profit and Measure rule

Compute the formation height by subtracting the value of the
neckline from the highest high reached in the head, measured
vertically. Subtract the result from the breakout price where prices
pierce the up-sloping neckline, or, if the neckline slopes
downward, closes below the right shoulder low. The result is the
minimum target price to which prices descend. Alternatively,
compute the formation height from the highest high to the daily
low price in the higher of the two troughs. Subtract the result
from the daily high price in the higher of the two troughs to get
the target price. This method boosts the success rate and does not
rely on the neckline or breakout point (useful for steep necklines).

stop loss for trading signals

For short sales, place a stop just above the lower of the two
troughs or just above the neckline, whichever is higher.
Watch for pullback

Initiate a short sale or add to your position during a pullback. Wait for prices to begin falling again before placing the trade as prices
sometimes pull back and continue moving up

Tall or narrow patterns perform better than short or wide ones. Avoid
patterns that are both short and wide
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