| For full-time investors who rely on volatility and | | | | Ideally, the Lower Shadow will be at least twice as |
| day-to-day fluctuations in security prices, it is an | | | | long as the Body. If you are just starting to learn |
| understatement that they must learn technical | | | | technical analysis, the Hanging Man might look like a |
| analysis. Such analysis enables them to make | | | | square tadpole with a straight tail. |
| appropriate changes to their positions, but not all | | | | As with any pattern, people who learn technical |
| technical analysis accommodates short-term trading. | | | | analysis will still want to confirm signals with other |
| For traders who look to take advantage of quick | | | | indicators, including fundamental analysis. |
| entry and exit points, short-term patterns are their | | | | With the Hanging Man, investors will likely want to |
| best allies. | | | | see a bearish gap between the Real Body of the |
| As part of the ongoing Learn Technical Analysis | | | | Hanging Man on the open of the next session. The |
| Series, we will discuss a short-term pattern known as | | | | wider this gap, the better. With this in mind, the Real |
| the Hanging Man. This pattern gives traders an | | | | Body of the following day should ideally be lower |
| outlook as to the short-term range of that security. | | | | than the close of the previous day. For this reason, |
| And given its gloomy name, investors can | | | | investors really need to know more than a handful of |
| immediately identify the pattern as a bearish signal. | | | | patterns when they learn technical analysis skills. |
| When looking for a Hanging Man, investors will need | | | | In some cases, bullish market activity could produce a |
| to study the security's candlestick chart. For those | | | | false Hanging Man pattern. Investors can confirm a |
| who have just started to learn technical analysis, the | | | | false pattern when the open of the next day's |
| candlestick consists of horizontal lines for the open | | | | session is higher than the Real Body of the signaling |
| and close, and a vertical line for the day's range. The | | | | Hanging Man pattern. As well, investors should be |
| open and close lines are squared off, forming the | | | | wary of White Real Body patterns, which occurs |
| "Real Body" and if the range traded above the open | | | | when the pattern's close is higher than the open. |
| or below close, that part forms the tail, or "Shadow." | | | | Without question, people who learn technical analysis |
| The Hanging Man will consist of a small "Black Body" | | | | can use their skills as primary discovery tools for |
| formed by a higher open and a lower close, as well | | | | buying and selling opportunities, or as confirmation for |
| as a long "Lower Shadow" meaning the stock traded | | | | trades. Ultimately, they will make smarter trades and |
| much lower than the close at some point in the day. | | | | enjoy the rewards. |