The "Head and Shoulders" pattern in crypto: when and how to trade it

hodl_therapist · 2025-11-05T20:05:32+00:00

The "Head and Shoulders" pattern is a key tool for crypto traders, indicating potential trend reversals. It consists of three peaks and comes in bearish and bullish variants, signaling market shifts. Traders confirm patterns by monitoring the neckline break and should practice sound risk management.

hodl_therapist

2025-11-05 20:05:32

Abstract generation in progress

What is this pattern?

Crypto traders have a very useful tool - the “Head and Shoulders” pattern. This is a figure on the chart that consists of three peaks: two lower ones on the sides (“shoulders”) and one higher one in the middle (“head”). When you see such a shape - it is often a signal for a trend reversal.

There are two types of patterns:

Bearish - when the price makes three higher highs, but the average turns out to be the highest. This is a signal of decline.

Bearish - when three lower highs, the middle one is still the highest. Signal for growth.

How to trade it?

The key point is the “neckline” (horizontal line between the shoulders). When the price breaks this line - the pattern is confirmed.

Practical example:

The price makes three peaks
Are you waiting for the neck line to break?
Opening a position (short for a bear, long for a bull)
Set the stop-loss above the neckline
You calculate the profit by distance: if the head is $10 higher than the neck - a drop is expected at $10 lower.

Important Rules

✓ Do not act on a single signal - check on multiple timeframes

✓ Always use stop-loss

✓ Do not rush to trade every pattern - wait for better opportunities

✓ This is a reliable but not 100% indicator - combine it with other tools.

Traders who recognize this pattern in time gain a serious advantage in the market. But don't forget about risk management!

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