Most merchants will agree that there are few issues extra gratifying than using a gentle 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 notably true in buying and selling which is why it’s important to grasp when a transfer to the draw back is more likely to emerge and find out how to handle your threat accordingly. On this article, we’ll share with you what the hanging man candlestick reversal sample is and find out how 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 caused by many market members 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 pink candle showing on the prime of the upward pattern because 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 not less than twice the size of the physique.

1. Upward pattern: The hanging man can solely be recognized as such as soon as it has shaped on the prime of an uptrend.
2. Opening degree: The hanging man candle can both be a inexperienced candle (bullish), or a pink candle (bearish) though, the bearish candle gives a greater indication of a weakening market.
3. Higher shadow: A small higher shadow signifies that there was an try to take care of the present uptrend earlier than the numerous drop within the value of the Pound Sterling.
4. Lengthy decrease shadow: That is in all probability one of the crucial insightful observations on the candle, depicting a big unload 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.
5. Closing degree: On this case the closing degree was under the opening degree and subsequently, 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 brief time period upward pattern line, this may be seen as a continuation of the downward long run pattern. One other doable entry degree could possibly be to enter the commerce as soon as the market has moved previous the low of the hanging man candle.

TRADING THE HANGING MAN?

You will need to view the hanging man candle formation in relation to the long run pattern. The easiest way 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 day by day or weekly timeframe to watch the course 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 best entry level on your commerce.

Step 1: Determine the long run pattern

View the chart on an extended timeframe (maybe a day by day chart) to get an thought of the course the market is heading. You don’t want to put a commerce in the other way of the long run pattern.

Step 2: Recognizing your supreme entry level

Making use of a shorter timeframe chart (4 hour chart), establish the best entry level. The hanging man candle formation gives us with a sign for a brief commerce.

Step 3: Make use of supporting indicators

Does the  Relative Energy Index verify 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 brief 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 appropriate, you will notice subsequent value motion shifting down – offering you with a sign to put your brief commerce.

Step 5: When to shut out of the commerce?

Every time coming into a commerce it’s all the time finest to have not less than a 1:2 Threat-to-Reward ratio. You’re risking half of what you propose to realize. Which means the gap out of your entry degree to your take revenue degree must be twice the gap out of your entry degree to your cease loss degree. 

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