THE HANGING MAN STRATEGY. MY EXPERIENCE OF USING! – Analytics & Forecasts – 11 Might 2023
Most merchants will agree that there are few issues extra pleasing than using a gradual up pattern all the best way to the highest. Sadly, because the previous adage goes, “all good issues should come to an finish”. That is significantly true in buying and selling which is why it’s important to know when a transfer to the draw back is prone to emerge and the way to handle your danger accordingly. On this article, we are going to share with you what the hanging man candlestick reversal sample is and the way to commerce it.
WHAT IS THE HANGING MAN?
A dangling man candle (aptly named) is a candlestick formation that reveals a pointy improve in promoting stress on the top of an current uptrend. That is typically led to by many market individuals believing the market has reached its highest degree ensuing within the ‘bears’ outweighing the ‘bulls’. This may be noticed within the GBPUSD chart under the place it’s clear to see the purple candle showing on the high of the upward pattern on account of mass promoting stress.
GBP/USD HANGING MAN CANDLESTICK
CHARACTERISTICS OF THE HANGING MAN CANDLE
The hanging man candle is characterised by having a small actual physique, little or no higher shadow (wick) and a decrease shadow no less than twice the size of the physique.
- Upward pattern: The hanging man can solely be recognized as such as soon as it has fashioned on the high of an uptrend.
- Opening degree: The hanging man candle can both be a inexperienced candle (bullish), or a purple candle (bearish) though, the bearish candle offers a greater indication of a weakening market.
- Higher shadow: A small higher shadow signifies that there was an try to keep up the present uptrend earlier than the numerous drop within the value of the Pound Sterling.
- Lengthy decrease shadow: That is most likely one of the vital insightful observations on the candle, depicting a big dump earlier than the bulls tried to regains some floor forcing the closing value to finish up considerably nearer to opening ranges however nonetheless down for the interval.
- Closing degree: On this case the closing degree was under the opening degree and due to this fact, confirms that it is a bearish hanging man candle.
IDENTIFYING HANGING MAN CANDLESTICK TRADING SIGNALS
The hanging man candlestick can be utilized to establish a brief commerce (bearish view of the market) because the lengthy shadow signifies huge promoting. The true check of the legitimacy of the hanging man candlestick is usually revealed in subsequent exercise on the chart. If the next candle strikes additional down and breaks under the quick time period upward pattern line, this may be seen as a continuation of the downward long run pattern. One other attainable entry degree might be to enter the commerce as soon as the market has moved previous the low of the hanging man candle.
TRADING THE HANGING MAN?
It is very important view the hanging man candle formation in relation to the long run pattern. One of the best ways to do that is to utilize a number of timeframe evaluation. Begin off by viewing the market utilizing an extended timeframe chart just like the every day or weekly timeframe to watch the route the market is tending to in the long run. Then, zoom-in utilizing a smaller timeframe chart (4 hour or 2 hour) to investigate the perfect entry level on your commerce.
Step 1: Determine the long run pattern
View the chart on an extended timeframe (maybe a every day chart) to get an thought of the route the market is heading. You do not need to position a commerce in the other way of the long run pattern.
Step 2: Recognizing your very best entry level
Making use of a shorter timeframe chart (4 hour chart), establish the perfect entry level. The hanging man candle formation offers us with a sign for a brief commerce.
Step 3: Make use of supporting indicators
Does the Relative Power Index affirm that the market has turned and now in a downward pattern? Has the 20 SMA line crossed over the 50 SMA line? Does the hanging man candlestick seem close to the highest of the quick time period uptrend? Is a related Fibonacci retracement degree close by?
Step 4: Place your commerce
Search for an entry level on the low of the hanging man candlestick. In case your bearish view of the market is right, you will notice subsequent value motion transferring down – offering you with a sign to position your quick commerce.
Step 5: When to shut out of the commerce?
Every time getting into a commerce it’s all the time greatest to have no less than a 1:2 Danger-to-Reward ratio. You’re risking half of what you propose to realize. Which means that the gap out of your entry degree to your take revenue degree needs to be twice the gap out of your entry degree to your cease loss degree.
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