Short-term investors rely on volatility and overall stock trends when it comes tomaking 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.
This installment of the Learn Technical Analysis Series examines a short-term pattern called the Hanging Man. With an eye on the short-term outlook of a security, this pattern indicates when it is time to sell an existing position or sell short a non-existent one. In other words, it is a bearish signal.
To identify a Hanging Man patterns, investors will rely on the security's candlestick chart. New investors who want to learn technical analysis in any great detail can recognize this chart by the box that makes up the security's open and close range, and the vertical line that makes up the balance of the trading range. The box, often colored green or white when the close is higher than the open, and red or black when the close is lower, is called the "Real Body" and the rest of the range is called the "Shadow."
The Hanging Man will consist of a small "Black Body" formed by a higher open and a lower close, as well as a long "Lower Shadow" meaning the stock traded much lower than the close at some point in the day. Ideally, the Lower Shadow will be at least twice as long as the Body. If you are just starting to learn technical analysis, the Hanging Man might look like a square tadpole with a straight tail.
As noted in previous parts of this series, any technical pattern or indicator, including the Hanging Man, should never be used in isolation. Investors who properly learn technical analysis should always confirm the signals they discover.
One way to confirm the signal is on the following trading day, investors should seek a bearish gap on the open from Real Body. The farther down from the Real Body, the better. In terms of the following day's Real Body, it should be lower than the signal's Real Body, something that will not be confirmed until the close. For this reason, astute investors who learn technical analysis will rely on a multitude of other indicators when making trades based on a Hanging Man.
Some things investors should be cautious about is overall bullish market activity. Overly bullish markets often product false Hanging Man patterns, which can be confirmed when the open following the pattern is higher than the Real Body. Also, investors should not overlook the "color" of the Hanging Man's Real Body. Remember that "green and White are a Bear Trap's Delight" when it comes to the Hanging Man.
Even after people learn technical analysis, they will never rely on a single pattern to make a decision on a security. In most cases, they will use the pattern as a starting point and refer to other patterns and indicators to confirm or refute that indication. The more confirmation they have, the smarter their trades and consequently the higher their success.
This installment of the Learn Technical Analysis Series examines a short-term pattern called the Hanging Man. With an eye on the short-term outlook of a security, this pattern indicates when it is time to sell an existing position or sell short a non-existent one. In other words, it is a bearish signal.
To identify a Hanging Man patterns, investors will rely on the security's candlestick chart. New investors who want to learn technical analysis in any great detail can recognize this chart by the box that makes up the security's open and close range, and the vertical line that makes up the balance of the trading range. The box, often colored green or white when the close is higher than the open, and red or black when the close is lower, is called the "Real Body" and the rest of the range is called the "Shadow."
The Hanging Man will consist of a small "Black Body" formed by a higher open and a lower close, as well as a long "Lower Shadow" meaning the stock traded much lower than the close at some point in the day. Ideally, the Lower Shadow will be at least twice as long as the Body. If you are just starting to learn technical analysis, the Hanging Man might look like a square tadpole with a straight tail.
As noted in previous parts of this series, any technical pattern or indicator, including the Hanging Man, should never be used in isolation. Investors who properly learn technical analysis should always confirm the signals they discover.
One way to confirm the signal is on the following trading day, investors should seek a bearish gap on the open from Real Body. The farther down from the Real Body, the better. In terms of the following day's Real Body, it should be lower than the signal's Real Body, something that will not be confirmed until the close. For this reason, astute investors who learn technical analysis will rely on a multitude of other indicators when making trades based on a Hanging Man.
Some things investors should be cautious about is overall bullish market activity. Overly bullish markets often product false Hanging Man patterns, which can be confirmed when the open following the pattern is higher than the Real Body. Also, investors should not overlook the "color" of the Hanging Man's Real Body. Remember that "green and White are a Bear Trap's Delight" when it comes to the Hanging Man.
Even after people learn technical analysis, they will never rely on a single pattern to make a decision on a security. In most cases, they will use the pattern as a starting point and refer to other patterns and indicators to confirm or refute that indication. The more confirmation they have, the smarter their trades and consequently the higher their success.
