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Reversal Indices Trading Chart Patterns: Head and Shoulders & Reverse Head Shoulders

Head and shoulders Indices Trading Chart Pattern

This is a reversal indices trading chart pattern that forms after an extended Indices upward indices trading trend. It is made up of three consecutive peaks, the left shoulder, the head and the right shoulder with two moderate troughs between the shoulders.

 

This indices trading pattern is considered complete once indices price penetrates below the neckline, which is drawn by joining the two troughs between the shoulders.

 

To go short, Indices traders place their sell stop indices trading orders just below the neckline.

 

Summary:

  • This Indices pattern forms after an extended move upwards
  • This formation indicates that there will be a reversal in the indices trading market
  • This formation resembles head with shoulders thus its name.
  • To draw the neckline we use chart point 1 and point 2 as shown below. We also extend this line in both directions.
  • We sell when indices price breaks below the neckline; see the chart below for explanation.

Reversal Indices Trading Chart Patterns

 

Or the head and shoulders can also form on a slanting neckline, like the indices trading example that is explained as shown below:

Slanting Head and Shoulder Indices Trading Chart Pattern

 

 

Example of Head and Shoulders Pattern on a Indices Trading Chart

Example of Head and Shoulders Pattern on a Indices Trading Chart

Head and Shoulders Pattern

 

This indices trading chart pattern can also be formed on a slanting neckline, like the one above, the neckline does not have to be necessarily horizontal.

 

 

Reverse Head and shoulders Indices Trading Chart Pattern

This is a reversal head and shoulders pattern that forms after an extended Indices downward indices trading trend. It resembles an upside-down head shoulders.

 

This indices trading pattern is considered complete once indices price penetrates above the neckline, which is drawn by joining the two peaks between the reverse shoulders.

 

To go long buyers place their buy stop indices trading orders just above the neckline.

 

Summary:

  • This Indices pattern forms after an extended move downwards
  • This formation indicates that there will be a reversal in the indices trading market
  • This formation resembles is upside-down, thus its name Reverse.
  • We buy when indices price breaks above the neckline; see the chart below for explanation.

Reverse Head and shoulders Indices Trading Chart Pattern

 

Example of Reverse Head and Shoulders Pattern on a Indices Trading Chart

Reverse Head and shoulders Indices Trading Chart Pattern in Indices Trading

Example of Reverse Head and Shoulders Pattern

 

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