If You Learn Technical Analysis, You Need To Learn About The Hanging Man Pattern
For full-time investors who rely on volatility and day-to-day fluctuations in security prices, it is an understatement that they must learn technical analysis. Such analysis enables them to make appropriate changes to their positions, but not all technical analysis accommodates short-term trading. For traders who look to take advantage of quick entry and exit points, short-term patterns are their best allies.
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."
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 with any pattern, people who learn technical analysis will still want to confirm signals with other indicators, including fundamental analysis.
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.
When the overall market sentiment is overly bullish, Hanging Man patterns are often falsely created. For this reasons, investors should sit tight until the following day. If the open is higher than the Real Body of the Hanging Man, it is likely a false signal. Also, investors should never forget to take the Hanging Man's Real Body's color into account -- "green and white are a bear trap's delight!" Remember that a red or black Real Body creates a more reliable pattern.
Without question, people who learn technical analysis can use their skills as primary discovery tools for buying and selling opportunities, or as confirmation for trades. Ultimately, they will make smarter trades and enjoy the rewards. - 23196
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."
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 with any pattern, people who learn technical analysis will still want to confirm signals with other indicators, including fundamental analysis.
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.
When the overall market sentiment is overly bullish, Hanging Man patterns are often falsely created. For this reasons, investors should sit tight until the following day. If the open is higher than the Real Body of the Hanging Man, it is likely a false signal. Also, investors should never forget to take the Hanging Man's Real Body's color into account -- "green and white are a bear trap's delight!" Remember that a red or black Real Body creates a more reliable pattern.
Without question, people who learn technical analysis can use their skills as primary discovery tools for buying and selling opportunities, or as confirmation for trades. Ultimately, they will make smarter trades and enjoy the rewards. - 23196
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 @ 1:47 AM
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