The Head and Shoulders Pattern: The Hidden Take Profit Tactic No One Talks About

The Chart Pattern That Traders Love to Ignore (Until It’s Too Late)

Every trader has that moment—staring at a price chart, trying to convince themselves that a pattern is forming. Is that a breakout? A trend reversal? Or just your brain playing tricks on you, like when you thought Bitcoin would “never drop below $60K again”?

One of the most powerful yet misunderstood patterns in Forex is the Head and Shoulders pattern. And while most traders recognize it, few know how to use it effectively with take profit orders to maximize gains.

In this article, we’ll unlock the hidden secrets of this pattern, show you how to execute a ninja-level take profit strategy, and reveal why most traders fumble this golden opportunity.

The Head and Shoulders Blueprint: What Most Traders Overlook

Let’s break it down for those who are still recovering from their last losing trade (we’ve all been there):

• Left Shoulder: Price moves up, then retraces.
• Head: Price rises higher, then dips again.
• Right Shoulder: Price moves up one last time but fails to reach the previous peak.
• Neckline: The support level connecting the lows between the shoulders and the head.

When the price breaks below the neckline, it signals a potential downtrend—music to the ears of a trader who knows how to place the perfect take profit order.

But here’s where most traders go wrong: They assume the pattern will work like magic and enter trades without a solid take profit plan. That’s like baking a cake and forgetting to set a timer. (Spoiler: It won’t end well.)

The Secret Sauce: How to Set Take Profit Orders Like a Pro

Now that we’ve established what the Head and Shoulders pattern is, let’s get to the part that elite traders don’t want you to know—how to set your take profit levels with precision.

1. The Classic Approach: Targeting the Height of the Pattern

The traditional method for setting a take profit order involves measuring the vertical distance from the head to the neckline and subtracting it from the breakout point. Here’s how it works:

• Measure the distance from the head to the neckline.
• Subtract this distance from the breakout level.
• That’s your initial take profit target.

Example: If the head is at 1.1500 and the neckline is at 1.1300, the height of the pattern is 200 pips. If the price breaks the neckline at 1.1300, your take profit should be at 1.1100.

2. The Advanced Fibonacci Extension Trick

For traders who want an extra edge (because who doesn’t?), using Fibonacci extensions can help refine your take profit target. Here’s how:

• Apply the Fibonacci extension tool to the high and low points of the pattern.
• Set take profit levels at the 1.272 or 1.618 extension levels.

Why? Because institutions and big-money traders often use Fibonacci levels to place their orders. This means if you align your take profit with theirs, you’re riding the big waves instead of getting crushed by them.

3. The Hidden S/R Level Strategy

Another under-the-radar technique is to identify strong historical support or resistance levels near your calculated take profit level.

• Look for previous price consolidations or major reversals in the past.
• Set your take profit just above these levels to ensure you exit before potential market reversals.

This tactic prevents the dreaded “missed by one pip” nightmare that haunts every trader at some point.

Why Most Traders Get It Wrong (And How You Can Avoid It)

The biggest mistakes traders make when using the Head and Shoulders pattern?

1. Forgetting to confirm the breakout – Always wait for a candle close below the neckline before entering. Jumping in too early is like texting your ex at 2 AM—bad idea.
2. Placing take profit orders too greedily – If you’re aiming for a moonshot, you’ll likely get burned. Stick to realistic targets based on historical price action and technical indicators.
3. Ignoring volume confirmation – A real breakdown should have strong volume backing it. Weak volume? Weak trade.

A Real-World Example: EUR/USD Head and Shoulders Breakdown

In September 2023, EUR/USD formed a textbook Head and Shoulders pattern on the daily chart. The neckline break at 1.0950 confirmed the downtrend, and traders who measured the pattern’s height (approximately 150 pips) set their take profit at 1.0800.

However, those who used Fibonacci extensions captured an even bigger move down to 1.0750, where strong support was identified from previous months.

Final Takeaways: What You Need to Do Next

• Spot the Head and Shoulders pattern early and confirm with volume.
• Use smart take profit strategies like measured moves, Fibonacci extensions, and historical S/R levels.
• Always wait for confirmation before entering a trade—fake breakouts are real heartbreakers.
• Refine your strategy with elite tools like the Smart Trading Tool to automate calculations.

Want to master these techniques? Get exclusive Forex analysis and live trade insights inside the StarseedFX Community!

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Image Credits: Cover image at the top is AI-generated