Start With The Hanging Man Pattern When You Learn Technical Analysis
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.
When looking for a Hanging Man, investors will need to study the security's candlestick chart. For those who have just started to learn technical analysis, the candlestick consists of horizontal lines for the open and close, and a vertical line for the day's range. The open and close lines are squared off, forming the "Real Body" and if the range traded above the open or below close, that part forms the tail, or "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 with any pattern, people who learn technical analysis will still want to confirm signals with other indicators, including fundamental analysis.
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.
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.
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. - 23212
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.
When looking for a Hanging Man, investors will need to study the security's candlestick chart. For those who have just started to learn technical analysis, the candlestick consists of horizontal lines for the open and close, and a vertical line for the day's range. The open and close lines are squared off, forming the "Real Body" and if the range traded above the open or below close, that part forms the tail, or "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 with any pattern, people who learn technical analysis will still want to confirm signals with other indicators, including fundamental analysis.
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.
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.
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. - 23212
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 @ 3:22 AM
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