If you’re thinking about using charts & chart patterns, you should know that the price of foreign currency pair often follow trends and that such trends get repeated over and over again. Because of this, you can check out the history of a particular pair in order to somehow predict its immediate movement. A very reliable and popular among these chart patterns is the head-and-shoulders pattern, which got its name because it resembles a person’s head with 2 shoulders.
If you encounter the head-and-shoulders pattern with the head on top, it means that the price of the foreign currency pair is expected to fall when the pattern is completed. This pattern is often formed when an upward trend has reached its peak. On the other hand, when the head is at the bottom, you can expect the price to rise. This pattern is usually formed when there’s a downward trend.
By sharing with you this short piece of information, I hope you now understand what this pattern is all about and that you can use this information when you decide on your entry and exit forex positions in the future. It’s good to know information such as this. In my case, I rely on auto charting features of the AlfaTrade trading platform because I’ve come to realize its straightforwardness and timeliness in delivering the much needed indicator. I’m glad to have come across this charting methodology as it provides convenience and ease of use in my day-to-day trading of foreign currency pairs.