Head and Shoulders Pattern

A head and shoulders pattern is three peaks in a row after a rise, with the middle peak highest, that traders read as a reversal pattern once price closes beyond the neckline.

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Last updated 27 October 2026

A head and shoulders pattern is three peaks in a row after a rise, with the middle peak (the head) higher than the two outer peaks (the shoulders). A line through the two lows between the peaks is called the neckline. Traders read it as a reversal pattern once price closes below that line.

The US Commodity Futures Trading Commission's glossary describes it as a formation generally considered to be predictive of a price reversal.

What are the parts of a head and shoulders pattern?

The pattern has four parts: a left shoulder, a higher head, a right shoulder below the head, and a neckline joining the two lows between them. Each peak forms as price rallies and falls back. The list below describes each part, and the neckline can be flat or sloped depending on where the two lows sit.

The upside-down version, three troughs with the middle one lowest, is the inverse head and shoulders. The CFTC calls it a head and shoulders bottom. The full walk-through, including how to draw the neckline, is in the chart reversal patterns lesson.

After a rise, a price line makes a left shoulder, a higher head and a lower right shoulder, with both lows between them on a dashed neckline, then closes below the neckline
Three peaks with the middle one highest; the pattern completes on a close below the neckline through the lows.

Worked example: head and shoulders on GBPUSD

Point Price
Left shoulder 1.2750
Head 1.2800
Right shoulder 1.2755
Neckline (both lows) 1.2700
Pattern height 1.2800 − 1.2700 = 0.0100 = 100 pips
Conventional projection 1.2700 − 0.0100 = 1.2600

The projection is called the measured move. Traders use it to set a profit target and compare it with the stop distance. At 0.10 lot of GBPUSD one pip is worth about $1. A sell at a 1.2695 close below the neckline gains about $95 if price falls to 1.2600; with the stop above the right shoulder at 1.2760, a rise to the stop loses about $65. The pip value calculator shows the money value of a distance for other pairs and sizes.

What confirms a head and shoulders pattern?

A head and shoulders pattern is confirmed when a candle closes below the neckline, or above it for the inverse version. Before that close, the three peaks are only a setup that can still fail. Some traders also wait for a retest of the broken neckline before they enter.

Related shapes are the double top and the double bottom.

How do you draw head and shoulders in MetaTrader 5?

MetaTrader 5 does not detect head and shoulders patterns, so you draw each one yourself with a trend line and horizontal lines. Add analytical objects from the Insert menu or the Line Studies toolbar: a trend line through the two lows for the neckline, and horizontal lines at the peaks if you want to compare their heights.

What do traders get wrong about head and shoulders?

The common mistake is treating the pattern as complete once the head forms, before price has closed beyond the neckline. Three peaks are only the setup. The pattern counts once a candle closes beyond the neckline, and the measured move is taken from that break, so an entry before it trades a pattern that may never finish.

Sources

Learn it properly in the full lesson: Chart Patterns: Head and Shoulders, Double Tops and Bottoms

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