There are several important patterns that every trader should know about if he wants to succeed in trading. For example, you can examine the shooting star chart finmax more closely to understand the features of this pattern. But in this article we will talk about the Hanging Man pattern. If you study this material, you will have the opportunity to be more attentive to work on Forex.
Hanging Man is a reversal model of Japanese candlesticks that gives a signal for sale. The “Hanging Man” candle is bearish. The pattern is not very strong, but it is formed quite often at different intervals and markets, including Forex. Visually, Hanging Man is very similar to the previous patterns, and differs from them by the details that should be paid close attention to. As a single candlestick, Hanging Man is formed at the top of the uptrend (at the peak of the market).
The body size of a candle can be any (although usually it is small), as well as its color. But in short-term trading, a black candle will be a sign of greater strength of the Japanese candlestick pattern. The upper shadow of the pattern candlestick is very short (maximum 10% of the candlestick range) or absent at all. The lower shadow, on the contrary, is long and is 200-300% of the candlestick body length. Agree that by adding a little bit of imagination (or adding to the lower shadow of the “hands and legs”) in this candle you can really see a man hanging on the market top! Let us try to analyze the psychology of the market corresponding to the pattern of Hanging Man .
At first, the market is clearly dominated by bulls, the price rises, the market goes up. So, the pattern candle opens above the previous one. But then, during this trading session, the price falls (a “deep” lower shadow is formed). At the same time, the maximum does not go beyond the candlestick body. Bulls begin to overcome doubts, and bears, seeing that the market is “exhaled” (especially if a black bearish Hanging Man is formed), begin to show activity. The price goes down.
Hanging Man Features
But the most interesting thing, perhaps, is not even the psychology of the Hanging Man model, but its trade features. Let’s study them.
- Hanging apart. The signal of the model will increase the presence of a gap up, between the previous candle and the candle pattern.
- The black shadow of the gallows. The Hanging Man candlestick pattern becomes stronger when it has a black body (the bigger, the better) and a long lower shadow. If the lower shadow is three or more times the size of the candlestick body, it will be an even stronger “Takuri” candlestick, with which you can also often meet. If the Hanging Man has a white body, it is desirable that it is as small as possible.
- Legs dangling without support. Another sign of Hanging Man’s strength will be his breaking through the lower shadow of the local support level. Such a break-down price corridor confirms the beginning of a bearish trend in the market.
- Control candlestick. In order to finally make sure that the market turns down, Hanging Man needs a control confirmation. It can be: a big black candlestick with a long upper shadow, another bearish candlestick pattern, opening the next candlestick below the Hanging Man’s body, and reaching and exiting the overbought zone by the oscillator. At the same time, the presence of a strong bullish candle in front of the pattern (especially the closing pickled candle) or the penetration of an important resistance level by Hanging Man’s body should alert. In this case, think three times before selling!
If you want some help in these matters, then start studying Global Currency Management. As a result, you may have some interesting new opportunities to start learning more about this topic.