What is a ‘head and shoulders’ pattern?

'Head and shoulders' is a useful charting concept that spread betters can use in short-term trading. John C Burford explains how.

I have been asked to expand a little on the chart formation known as the 'Head and Shoulders' (H&S). Most traders will have heard of this pattern, but they may not be aware that the concept can be employed in a modified form in short-term trading. So today I'd like to show you how I use it in my trading.

No self-respecting chartist of my era would dream of not searching for H&S patterns at the suspected end of a major bull or bear trend. Below is an example of what a good one looks like and it's a real corker!

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John is is a British-born lapsed PhD physicist, who previously worked for Nasa on the Mars exploration team. He is a former commodity trading advisor with the US Commodities Futures Trading Commission, and worked in a boutique futures house in California in the 1980s.

 

He was a partner in one of the first futures newsletter advisory services, based in Washington DC, specialising in pork bellies and currencies. John is primarily a chart-reading trader, having cut his trading teeth in the days before PCs.

 

As well as his work in the financial world, he has launched, run and sold several 'real' businesses producing 'real' products.