Head and shoulders pattern: what it is and how to spot one
By Bec, futures trader and founder of Wildflower · Updated
A head and shoulders is a chart pattern with three peaks: a high peak (the head) between two lower ones (the shoulders). A line through the two lows between the peaks is the neckline. Traders count the pattern as complete when a candle closes below that line.
What a head and shoulders pattern is, and why it’s called that
Picture the outline of a person’s head and shoulders. Price makes a peak (the left shoulder), dips, climbs to a higher peak (the head), dips again, then makes a lower peak (the right shoulder). The two dips leave two lows, and a line through them is the In a head and shoulders pattern, the line through the two lows between the three peaks (or the two highs, in the inverse pattern).More in the glossary.
In The pattern of swing highs and swing lows on a chart. Traders use it to say whether price is rising, falling or moving sideways.More in the glossary terms, the head is the last higher high. The right shoulder is a lower high: price tried to climb again and stopped short. That’s why traders read the pattern as a rise losing its push. It forms over many candles, on any timeframe, and it’s one of the oldest shapes in chart reading.
How to identify a head and shoulders, step by step
1. A peak after a rise
Price climbs and makes a A peak on the chart: a candle whose high is above the highs of the candles on both sides of it.More in the glossary: the first peak. That’s the left shoulder.
2. A higher peak
Price dips, then climbs past the left shoulder to a higher high: the head.
3. A lower peak
Price dips again, then climbs to a peak below the head, near the left shoulder’s height.
4. Draw the neckline
Join the two lows between the peaks. The pattern is complete when a candle closes below it.
The neckline doesn’t have to be flat. Here the second low is half a point higher, so the line slopes up a little, and where a candle has to close to break it moves up with it. Some traders draw a flat neckline at the lower of the two lows instead. Both are in use. The choice is yours.
Head and shoulders and inverse head and shoulders
Head and shoulders (top). Three peaks after a rise, the middle one highest. The neckline runs under them, through the two lows. Traders call it a Falling, or expecting a fall. A bearish candle closed lower than it opened.More in the glossary pattern, and it’s complete when a candle closes below the neckline.
Inverse head and shoulders (bottom). The same shape upside down: three dips after a fall, the middle one lowest. The neckline runs above them, through the two highs. It’s called Rising, or expecting a rise. A bullish candle closed higher than it opened.More in the glossary, and it’s complete when a candle closes above the neckline. You’ll also hear it called a head and shoulders bottom.
What counts, and what doesn’t
The head has to be the highest. If the third peak climbs above the middle one, there’s no head. That’s a run of higher highs.
A close, not a wick. A candle that pokes below the neckline and closes back above hasn’t completed the pattern. Until a close below, it’s three peaks and a line.
The shoulders don’t have to match. Here they’re half a point apart. Real ones are rarely level. How far apart they can be, and how far the head has to stand above them, are choices you make and can write down in The smallest step a price can move. On many stock index futures that’s 0.25 of a point.More in the glossary.
It needs something to reverse. The pattern is read as the end of a rise. Three peaks in the middle of a sideways range are harder to call a top.
Timeframe matters. A head and shoulders on a 5-minute chart may be a small wobble on a 1-hour chart, and invisible on a daily one.
What can happen after the neckline breaks
Back to the neckline. After the break, price sometimes comes back up to the neckline from below before moving on. Traders call it a retest or a pullback. Some wait for it, and some don’t.
The break fails. Price closes back above the neckline. Traders call it a failed head and shoulders.
Price can also keep falling with no retest. The pattern can’t tell you which will happen.
The measured move. An old way of measuring the pattern: take the height from the head down to the neckline, then mark the same distance below the neckline from where it broke. Here the head is 11.25 points above the neckline, so the mark sits 11.25 points below it. It’s a measurement, not a forecast. Price may never get there, or may go well past it.
Where the head and shoulders comes from
The pattern was described by Richard Schabacker in the 1930s, and Robert Edwards and John Magee wrote it up in their 1948 book Technical Analysis of Stock Trends as a reversal pattern. They wrote about stocks, but the shape is read the same way on futures, forex and crypto charts today. They also noted that trading volume tends to be lighter on the right shoulder than the left. Some traders still check that, and some don’t.
Often confused with
Double top. Two peaks at about the same height, with no higher head between them. Read about double tops.
Triple top. Three peaks at about the same height. In a head and shoulders, the middle one stands clearly above the others.
Change of character. The first close below the latest higher low in a rise. The neckline break is often one, drawn a different way. Read about change of character.
Break and retest. Price breaks a level, then comes back to it. The retest of a neckline is one example. Read about break and retest.
A head and shoulders indicator for TradingView
Mark the pieces on a chart, to your own rules
Wildflower’s Indicator marks things on a chart from rules you describe in plain words, with every number typed by you. It can mark swing highs and swing lows, and a close below a line drawn under price through the two latest swing lows, which is how a rising neckline is drawn. A whole head and shoulders, with its three peaks, isn’t one of its building blocks. If you describe one, it tells you plainly. Everything it can build, you can check on a chart for free, then add to TradingView with a step-by-step guide.
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Common questions
What is a head and shoulders pattern?
Three peaks, the middle one highest, with a neckline through the two lows between them. It’s complete when a candle closes below the neckline.
Is head and shoulders bullish or bearish?
The regular pattern, at a top, is called bearish. The inverse pattern, at a bottom, is called bullish.
What is the neckline?
A line through the two lows between the three peaks. It can be flat or sloped.
What is an inverse head and shoulders?
The same pattern upside down: three dips, the middle one lowest, with a neckline above them.
When is a head and shoulders confirmed?
When a candle closes past the neckline. A wick through it doesn’t count.
Do the shoulders have to be the same height?
No. They’re rarely level. How far apart they can be is your choice.
How is a head and shoulders target measured?
The measured move takes the head’s height above the neckline and marks the same distance past the neckline from the break. It’s a measurement, not a forecast.
What is a failed head and shoulders?
One where price closes past the neckline, then closes back on the other side of it.
Does head and shoulders work on futures?
It forms on any candle chart, including futures, on any timeframe. The shape is read the same way everywhere.