Get To Know The Hanging Man Pattern When You Learn Technical Analysis
Short-term investors rely on volatility and overall stock trends when it comes to making money. It goes without saying that people who want to trade full time will have to learn technical analysis. Armed with this knowledge, traders will be able to execute proper trades and manipulate their positions in such a way to take advantage of short-term profit opportunities. In this regard, short-term patterns become one of the trader's most heavily used tools.
In this part of the Learn Technical Analysis Series, we study the Hanging Man. As a short-term pattern, the Hanging Man gives investors an indication as to the security's immediate price expectation, which would be downward since it is a bearish signal.
When trying to identify a Hanging Man pattern, investors need to pull up the candlestick chart for the security in question. Rookie investors who have just begun to learn technical analysis will identify this type of chart type by a day's "Real Body" which is a box made up of one horizontal line for the security's open and another horizontal line for the close, and two vertical lines that join them (or box them in). The "Shadow" is the range in which the security trades over and below the Real Body.
For identifying the Hanging Man, traders who are just starting to learn technical analysis want the Real Body to be black, something that is created by a lower close. As well, the Shadow will preferably exist only below the Real Body. In fact, the Shadow, which will look more like a tail to a square body, should be at least twice as long as the Real Body.
Since no pattern should ever be used in isolation, investors who learn technical analysis should confirm the Hanging Man with other indicators and analysis, including the security's and/or market's fundamentals.
With the Hanging Man, investors will likely want to see a bearish gap between the Real Body of the Hanging Man on the open of the next session. The wider this gap, the better. With this in mind, the Real Body of the following day should ideally be lower than the close of the previous day. For this reason, investors really need to know more than a handful of patterns when they learn technical analysis skills.
In some cases, bullish market activity could produce a false Hanging Man pattern. Investors can confirm a false pattern when the open of the next day's session is higher than the Real Body of the signaling Hanging Man pattern. As well, investors should be wary of White Real Body patterns, which occurs when the pattern's close is higher than the open.
When investors learn technical analysis, they often use one pattern (such as the Hanging Man) as a starting point when it comes to discovering opportunities. Rarely will they rely on a single indicator. Using multiple indicators and analysis will result in smarter trades and a greater success ratio. - 23210
In this part of the Learn Technical Analysis Series, we study the Hanging Man. As a short-term pattern, the Hanging Man gives investors an indication as to the security's immediate price expectation, which would be downward since it is a bearish signal.
When trying to identify a Hanging Man pattern, investors need to pull up the candlestick chart for the security in question. Rookie investors who have just begun to learn technical analysis will identify this type of chart type by a day's "Real Body" which is a box made up of one horizontal line for the security's open and another horizontal line for the close, and two vertical lines that join them (or box them in). The "Shadow" is the range in which the security trades over and below the Real Body.
For identifying the Hanging Man, traders who are just starting to learn technical analysis want the Real Body to be black, something that is created by a lower close. As well, the Shadow will preferably exist only below the Real Body. In fact, the Shadow, which will look more like a tail to a square body, should be at least twice as long as the Real Body.
Since no pattern should ever be used in isolation, investors who learn technical analysis should confirm the Hanging Man with other indicators and analysis, including the security's and/or market's fundamentals.
With the Hanging Man, investors will likely want to see a bearish gap between the Real Body of the Hanging Man on the open of the next session. The wider this gap, the better. With this in mind, the Real Body of the following day should ideally be lower than the close of the previous day. For this reason, investors really need to know more than a handful of patterns when they learn technical analysis skills.
In some cases, bullish market activity could produce a false Hanging Man pattern. Investors can confirm a false pattern when the open of the next day's session is higher than the Real Body of the signaling Hanging Man pattern. As well, investors should be wary of White Real Body patterns, which occurs when the pattern's close is higher than the open.
When investors learn technical analysis, they often use one pattern (such as the Hanging Man) as a starting point when it comes to discovering opportunities. Rarely will they rely on a single indicator. Using multiple indicators and analysis will result in smarter trades and a greater success ratio. - 23210
About the Author:
Chris Blanchet has more than 16 years of experience as a Financial Advisor at one of the world's largest banks by market capitalization. To learn technical analysis free visit Online Trader Today.com where Chris writes about Technical Analysis and Options trading. Chris also maintains a debt-free blog at How To Repay Debt.com
posted by X - Men @ 2:09 AM
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