Currency Trading Trend Types - Head and Shoulders Top and Bottom Patterns
Head and shoulder tops are trading trends seen as a long uptrend in currency price, followed by a short drop, then another top that is higher than the first top, then another top that is lower than the middle one. This way the last movement is in the opposite direction than the first move, on a downtrend.
The name for head and shoulders is derived from the three tops that the pattern creates, that resembles, well… a head and two shoulders.
The head and shoulders bottom is not the addition of another body organ to the chart, but the reversal of the head and shoulders top. This way the pattern is upside down, starts off with a drop and ends with a rise.
Head and shoulders patterns are very useful for online forex currency trading, even though they are very hard to recognize. This is why if you do recognize them you should quickly take advantage of the discovery and start investing in the foreseen direction of the currency price.
Posted by Richard Hollar