Head and shoulders setups earn their reputation because they encode a failed rally attempt after a prior trend. The trouble begins when traders stretch the label onto every three-swing sequence on the chart.
Confirm the shoulders, not the story
Both shoulders should occupy a similar price region and form over comparable time. A “right shoulder” that drifts far below the left while volume expands into the break is often just a new downtrend leg, not a tidy reversal package.
Neckline slope matters. A steeply descending neckline usually implies the measured move is already partially spent before the break. In those cases we teach smaller size or a pass.
Invalidation comes first
Define the level that kills the thesis before you calculate the target. For a topping pattern, sustained acceptance back above the right shoulder high typically retires the idea. Write that rule in the journal before the order goes in.
Practice drill
Mark ten historical head-and-shoulders candidates on liquid ASX names. Score each for shoulder symmetry, neckline quality, and whether you would have stood aside. Bring the scoresheet to the next lab.