I've noticed that many beginners in crypto overlook one of the most reliable reversal patterns. It's the head and shoulders pattern—a classic figure that often signals a shift from an upward trend to a downward one.

Let's understand how it works. The pattern consists of four key elements. First, the left shoulder forms—a local maximum after the previous rise. Then the head appears, creating a higher peak. Next comes the right shoulder, usually slightly lower than the head. All of this is connected by a neckline—a horizontal or slightly sloped line that passes through the lows between the shoulders.

How do you spot this head and shoulders pattern on a chart? First, remember that it only forms in an uptrend. If the asset is rising, look for three clear highs and two lows. Pay attention to the volume—usually it decreases during the formation of the right shoulder but spikes sharply when the price breaks the neckline.

Now, the most interesting part—how to use this in trading. When the price breaks below the neckline, it’s a signal to enter a short position. Many traders catch this exact moment. But be cautious—set a stop-loss slightly above the right shoulder to protect yourself from false breakouts.

To determine the target price, measure the distance from the top of the head to the neckline, then project this same distance downward from the breakout point. Usually, the price moves exactly there.

The head and shoulders pattern works on all timeframes—from hourly to daily charts. On BTC, it triggers especially often. The main thing is not to forget about risk management and not to enter a trade at full size. Start small, test on historical data, and only then scale up. Good luck in trading!