Head and Shoulders

The Head and Shoulders is a bearish chart pattern that indicates a probable downward trend after an upward trend.

Visual Pattern

The pattern consists of:
The Left Shoulder, that creates the first peak.
The Head, that creates the second and highest/biggest peak.
The Right Shoulder, that creates the third and last peak.

Interpretation

After the third peak it is likely that price will move in a downward trend. This gives you a Short Sell signal.

Reducing Risk

You can reduce risk trading the Head and Shoulders pattern by looking at the downward slope that the low points between the three peaks have created.