I've noticed that many beginners in trading overlook one of the most reliable technical analysis patterns. We're talking about the head and shoulders pattern, which I’ve been using for several years, and here’s what I’ve realized: when this pattern forms correctly, the probability of a trend reversal becomes quite high.

The structure of the head and shoulders pattern is actually very logical. First, after an upward trend, a local maximum appears—that's the left shoulder. Then the price bounces up and creates a higher point—that's the head of the pattern. After that, a third maximum forms, usually slightly below the head—that's the right shoulder. If you connect the lows between these three peaks, you'll get the so-called neckline, which can be either horizontal or slightly sloped.

When I look for this pattern on charts, I always pay attention to a few points. First, the head and shoulders form exclusively in an uptrend, so there's no point in looking for it on falling assets. Second, you need to make sure there are indeed three maxima and two minima with proper geometry. And third, what is often overlooked is volume: usually, during the formation of the right shoulder, volume decreases, but when the price breaks the neckline, volume sharply increases—that’s a very important signal.

Now, about practical trading. When the price breaks the neckline downward, it signals a reversal into a downtrend, and that’s exactly when I open a short position. I place the stop-loss slightly above the right shoulder to protect myself from false breakouts, which sometimes happen. To determine the target price, I take the distance from the top of the head to the neckline and project this distance downward from the breakout point. This results in a fairly precise level where the decline often halts.

The main thing I’ve learned over years of trading is that the head and shoulders works best when you follow risk management rules and don’t rush into a trade. Wait for confirmation, check volume, set stops, and only then open a position. I see this pattern regularly on BTC, so if you watch the chart carefully, you can catch good moves.