What Is a Worked Example of Head and Shoulders?

Direct answer

A worked example of Head and Shoulders is a step-by-step, numbers-included walkthrough of how someone would identify the pattern’s key points (left shoulder, head, right shoulder), draw the neckline, and calculate a “distance” used for a hypothetical measurement. It does not guarantee any outcome, and it does not require live market data.

Mechanism or definition

Head and Shoulders is a named chart pattern defined by relative positions of three local highs: a left shoulder, a higher “head” in the middle, and a right shoulder that is typically lower than the head and similar to the left shoulder. A “neckline” is a horizontal or sloped level drawn through the troughs between these highs.

To keep the example verifiable, the worked approach below uses only geometry and assumed levels:

Identify three peaks: left shoulder (L), head (H), right shoulder (R).
Identify the troughs between them and connect them with a neckline (N).
Measure the vertical distance from the head peak to the neckline (D).
Measure from the neckline to a hypothetical target distance (again, only as a measurement), using the same D multiple you choose.

These measurements are descriptive tools. They do not prove that the pattern will “complete” in the future.

Worked numerical scenario example

Assumptions (state up front):

We observe a price chart where the y-values represent some consistent price measure (for example, closing prices), but we will not use any real-time data.
We use a simple, horizontal neckline.
We measure values using the chart’s vertical axis.
The pattern is recognized based on relative peaks and intervening troughs, not on any single candle.

Now the scenario:

Left shoulder peak (L) occurs at 1.1100.
Head peak (H) occurs at 1.1210.
Right shoulder peak (R) occurs at 1.1090.
The trough after the left shoulder is at 1.1000.
The trough after the head is at 1.1000.
Therefore the neckline (N) is 1.1000 (horizontal, by assumption).

Step 1: Confirm the relative shape

Head is higher than both shoulders: 1.1210 > 1.1100 and 1.1210 > 1.1090.
Shoulders are roughly similar: 1.1100 and 1.1090 are close.

Step 2: Measure the head-to-neckline distance

D = H − N = 1.1210 − 1.1000 = 0.0210.

Step 3: Create a hypothetical “distance-based” level Choose a simple measurement rule: target distance equals D (a 1× multiple). This is a chosen rule for the example, not a universal requirement.

Hypothetical measured level = N − 1×D = 1.1000 − 0.0210 = 1.0790.

What the worked example has produced

Key values: L = 1.1100, H = 1.1210, R = 1.1090, N = 1.1000, D = 0.0210.
A measurement-derived level: 1.0790.

Limitations and risks

False or unclear recognition: A chart can resemble the shape without the same underlying structure. Small differences in peak selection can change the neckline and D.
Neckline definition is variable: Necklines may be drawn differently (horizontal vs sloped), and the trough points used can vary by method.
Break behavior is not deterministic: Even if a price moves below a neckline level at some moment, that movement may reverse. Pattern names do not remove uncertainty.
Costs and execution matter: Any real-world application would also be affected by spread, liquidity, fees, and order execution quality. Those factors can cause realized outcomes to differ from the geometric measurement.
Context dependence: Market structure and nearby support/resistance can influence how price behaves after the pattern appears.

Verification and next question

To independently verify a head and shoulders measurement on any chart, check these items using your own chosen rules:

Can you point to three peaks and justify which one is the head (highest) and which two are the shoulders (lower than the head)?
Where are the two troughs that define the neckline in your drawing?
What is your measured D (head minus neckline), and what multiple (if any) did you apply to compute a comparable level?

A useful next question is: “What rule am I using to choose the neckline and the trough points?” Changing that rule is often where disagreements come from.