I've seen many times how traders get confused with the head and shoulders pattern on charts. Honestly, it's one of the most reliable reversal signals if you know what to look for.

Here's how I see it. First, the price rises and forms a local maximum — that's the left shoulder. Then it pulls back, but then rises even higher — this is the head of the pattern. The third maximum, the right shoulder, is usually roughly at the level of the left shoulder or slightly lower. Between these three peaks, there are two lows connected by a neckline line. This neckline is the key element of the entire structure.

When I hunt for the head and shoulders pattern in trading, I always wait for an uptrend. The pattern doesn't appear out of nowhere; it needs a background. I look at assets that are rising and search for this characteristic shape with three peaks. It's very important to check the volume — it usually decreases during the formation of the right shoulder but spikes when the price breaks below the neckline.

Now about trading. When the price breaks the neckline — that's my signal. Many open shorts at this moment because it often indicates the start of a downtrend. I always place a stop-loss slightly above the right shoulder to protect myself from false breakouts. They happen more often than beginners think.

Regarding the target price, I measure the distance from the top of the head to the neckline, then project the same distance downward from the breakout point. This gives an approximate target level. The head and shoulders trading pattern is not just a pattern; it's a way to understand when the market is preparing for a reversal.

An important point: the head and shoulders works best on higher timeframes. On minute charts, there's too much noise. I prefer daily and hourly charts.

Remember, this is not a 100% guarantee. The market can always surprise you. But if you see a clear head and shoulders pattern with good volume and proper formation, the chances of success are significantly higher. The main thing is not to trade without a stop-loss and always consider the risk before entering a position.