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What Is a Head and Shoulders Pattern

A head and shoulders is three peaks after a rise, the middle one highest, with a neckline drawn under the two dips between them. This paper shows you a real one drawn from the euro's highs of August, September and October 2025, the parts the name describes, the pattern on the daily chart with the close under its neckline, the head measured against the line, and how to measure it with the crosshair on your platform.

Difficulty
Intermediate
Reading time
5 min
Pages
8
Reviewed by
Saman Rahbar

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Three peaks

A head and shoulders is three peaks after a rise, with the middle one highest. The euro against the dollar made a high of 1.17427 on 22 August 2025, a higher one of 1.19189 on 17 September, and a lower one of 1.17284 on 17 October. Between the peaks the price dipped twice, to 1.15741 and 1.15421 — a pip being the fourth decimal place, the smallest step most people count in. A line under those dips is the neckline. On 31 October the day closed 38 pips under it.

The name

The name describes the outline. Two shoulders, each a peak of about the same height, with a head between them that rises higher than both. The two dips on either side of the head are joined by a line, the neckline. The shape belongs at the end of a rise. Turned upside down — two dips with a deeper one between them, after a fall — it is an inverse head and shoulders, and the neckline runs over the top of it instead of underneath.

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