Head & Shoulders
Head & Shoulders is a five-point reversal structure pattern. The “head” is a higher (or lower, for inverse) peak flanked by two “shoulders” at similar levels, separated by neckline lows (or highs).
Bearish H&S (Standard)
| Point | Role |
|---|---|
| X | Left shoulder high |
| A | Left neckline low |
| B | Head high (must be higher than X and D) |
| C | Right neckline low |
| D | Right shoulder high |
Validity rules:
- Head B must be higher than both shoulders X and D
- Shoulders within 15% of each other:
|X − D| / B ≤ 0.15 - Neckline lows within 4% of each other:
|A − C| / B ≤ 0.04
Inverse H&S (Bullish)
Mirror image — all highs become lows:
| Point | Role |
|---|---|
| X | Left shoulder low |
| A | Left neckline high |
| B | Head low (must be lower than X and D) |
| C | Right neckline high |
| D | Right shoulder low |
Same tolerances apply (15% shoulders, 4% neckline).
PRZ & Neckline
- PRZ: the band between A and C (neckline zone)
necklinePrice:(A + C) / 2— the average of the two neckline points
Confidence
confidence = 1 − (shoulderDiff + necklineDiff) / 2
Where each diff is normalised against its tolerance (15% and 4% respectively). Clamped to [0, 1].
Deduplication
If two H&S matches share ≥ 3 swing points but have opposite directions, the match with the lower confidence score is discarded. This prevents a single formation being reported as both bullish and bearish.
SL/TP
headHeight = |B − necklinePrice|
- SL: beyond the head (B), ±0.1% buffer
- TP1: necklinePrice
- TP2: necklinePrice ± headHeight
- TP3: necklinePrice ± 1.5 × headHeight
(± direction-dependent: subtract for bearish, add for bullish)
Levels are scalable via per-pattern TradingConfig multipliers. See TP Level Calculation.