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Head and Shoulders Pattern: The 96% Confirmation Rate Setup
Two traders spot a head and shoulders on BTC. One shorts the neckline break and banks 22%. The other enters early, gets stopped out on a fake breakdown.
The difference? Patience and confirmation.
Based on Thomas Bulkowski's research of 814 patterns, the head and shoulders has a 96-99% success rate AFTER neckline break. Here's how to trade it properly.
What Is Head and Shoulders?
A bearish reversal pattern with three peaks: Left Shoulder: First rally and pullbackHead: Higher rally (the peak), then declineRight Shoulder: Lower rally that fails to match the head Connect the two lows between peaks = Neckline When price breaks below the neckline, the reversal is confirmed.
The Statistics (Bulkowski's Research)
Volume: Your Confirmation Signal
The "real tip-off" according to experts: Left Shoulder: Highest volumeHead: Moderate volumeRight Shoulder: LOWEST volume This declining volume shows buying pressure fading. If the right shoulder has equal or higher volume than the head, be cautious.
Trading Strategy
Entry Options
Conservative EntryEnter on neckline break closeHigher probabilityClear invalidation point
Pullback EntryWait for retest of neckline (occurs 50-64% of the time)Better risk/rewardTakes patience Price Target Measure distance from head to necklineProject that distance DOWN from breakout point55% of patterns reach this target Stop Loss Standard: Above right shoulderAggressive: Just above necklineConservative: Above head Critical Rules
Quick Checklist Before trading any H&S pattern:
📚Want the Full Deep-Dive? This is the condensed version. For the complete guide with all statistics, expert quotes from Bulkowski and Martin Pring, advanced strategies, and more real examples, check out our extended article:
chartscout.io/head-and-shoulders-pattern
This article is for educational purposes only and does not constitute financial advice. Cryptocurrency trading involves substantial risk. Always do your own research.