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Head and shoulders: the neckline is the test
Three hills are easy to draw. A tradable rule needs more than a familiar silhouette.
Recognize the head, shoulders and neckline, including the inverse version.
A head-and-shoulders top has a middle peak higher than its neighbours after an advance. The two shoulders can differ in height and duration.
Connect the reaction lows to define the neckline; it may slope. State whether confirmation requires a touch, trade-through or close beyond it.
An inverse pattern after a decline has a deeper middle trough and two shallower neighbours. Its bullish confirmation is above the corresponding neckline.
Measured height is a conventional planning projection, not evidence of a reliable win rate. Sloping necklines and late entries change the actual trade geometry.
Let’s work through it
- Identify the three swings
- Draw the neckline
- Define confirmation before entry
Let’s use numbers · hypothetical example
Shoulders 110 and 111, head 116, horizontal neckline 104. A close 103 meets a close-below rule. Height 12 points projects 92 from 104, but the actual entry and stop still need a separate risk calculation.
Easy mistakes to watch for
- Requiring perfect symmetry
- Entering before confirmation
- Ignoring a sloping neckline
Keep in mind
Some apparent tops become continuation ranges. Ignore the pattern if your predefined failure condition appears.
Your turn
Draw the top and its inverse. Give each a confirmation and an invalidation condition.
A quick check before we move on
What identifies the head in the bearish version?
- The lowest reaction low
- A middle peak above both shoulders
- Any three identical highs
Check answer
A middle peak above both shoulders The central peak is higher than its neighbours. The neckline and surrounding trend provide the rest of the context.
Sources and further reading
Content reviewed: 29 October 2026
Educational material with hypothetical examples. Trading can cause substantial losses. A course, pattern, stop order or past result cannot guarantee a profit or limit every loss. Practise in simulation and check current rules and product terms in your jurisdiction.
