List of Financial Market Terms

A Head & Shoulders pattern describes a chart formation where the stock rises, declines, rises again higher than point A (C), declines (D), and finally rises to about the same height as A (E) before falling again (F).  See picture below from our live trading room for more clarification. A and E are "shoulders", and C is the head.

B and D make up what's considered the "neckline." After F, the stock will typically return to the "neckline", but will not surpass it.

For those involved in a trading system such as a stock trading system, options trading system, or futures trading system, this pattern is regarded as one of the most reliable patterns


Related terms: descending triangle pattern, ascending triangle pattern, symmetrical triangle pattern, rouding top pattern, rounding bottom pattern, and broadening pattern.

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