How to read a Head and Shoulders
A head and shoulders is a topping pattern. Price makes a high, a higher high, then a lower high, and the three peaks share a common floor called the neckline. It's one of the best-known reversal patterns, and also one of the most over-called.
What it looks like
It needs an uptrend to reverse. The left shoulder is a normal push higher and pullback. The head is a new high that fails and falls back to around the same level. The right shoulder is a weaker rally that can't reach the head.
Draw a line through the two lows between the peaks and you have the neckline. It can be flat or slightly sloped. Volume often fades on the right shoulder, since fewer buyers are willing to chase.
How traders read it
The pattern isn't finished until price breaks below the neckline. Before that, it's just three bumps. Short sellers enter on the break or on a retest of the neckline from below, and longs use the break as a reason to exit.
Stops for a short usually go above the right shoulder. The classic target takes the distance from the head down to the neckline and projects it below the break.
When it fails
The biggest mistake is calling it early. Plenty of right shoulders turn into continuation moves that blow through the head. Waiting for the neckline costs a bit of price and saves a lot of bad trades.
A neckline break that gets reclaimed within a few candles is another bad sign for shorts. Trapped sellers covering can push price back up quickly.
Practice it
Replay an example above and stop it once the right shoulder starts forming. Draw the neckline yourself, decide what would make you act, then watch whether the break comes.
Educational content only, not trading advice. Patterns describe what price did, not what it will do next.