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 learntechnical 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.
As part of the ongoing Learn Technical Analysis Series, we will discuss a short-term pattern known as the Hanging Man. This pattern gives traders an outlook as to the short-term range of that security. And given its gloomy name, investors can immediately identify the Hanging Man as 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.
When it comes to the Real Body of a Hanging Man, it will need to be a "Black Body" meaning the security closed lower than it opened. The Shadow will look like a tail with preferrably no Shadow above the Real Body. The tail should also be rather long, ideally twice as long as the box of the Real Body. For investors who are just starting to learn technical analysis, the Hanging Man might look more like a square tadpole than a hanging man.
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.
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.
As part of the ongoing Learn Technical Analysis Series, we will discuss a short-term pattern known as the Hanging Man. This pattern gives traders an outlook as to the short-term range of that security. And given its gloomy name, investors can immediately identify the Hanging Man as 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.
When it comes to the Real Body of a Hanging Man, it will need to be a "Black Body" meaning the security closed lower than it opened. The Shadow will look like a tail with preferrably no Shadow above the Real Body. The tail should also be rather long, ideally twice as long as the box of the Real Body. For investors who are just starting to learn technical analysis, the Hanging Man might look more like a square tadpole than a hanging man.
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.
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.
