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Today, let's talk about the candlestick pattern that's got quite an eerie name - the hanging man. Don't worry, though; it's not as scary as it sounds. This pattern is actually a signal that the market might be turning bearish, meaning it's a reversal pattern.
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You know, when you look at a candlestick chart, there are four key data points that help us understand what's going on: the open, close, high, and low. These points give traders a good idea of the ongoing tug-of-war between the bulls (buyers) and the bears (sellers) in the market.
What's cool is that these candlestick patterns can show up in all sorts of time frames, but for our little chat, let's focus on daily price patterns. Next time you see a hanging man, you'll know that it's a sign of potential change in the market!
So, let's dive into the appearance of the hanging man pattern. It's actually a single candlestick pattern, and it signals a potential reversal in the market. Now, it doesn't necessarily mean that there's an uptrend happening, but there should be some noticeable price increase before this pattern shows up.
You might find it interesting that the hanging man is part of a group of candles called spinning tops. These candles have small real bodies, and the size of their shadows isn't really important. What matters is how tiny the real body is. The shadows can vary a lot, from having none to having equally sized top and bottom shadows, or even having elongated shadows on either end. These spinning tops can also be part of other candlestick patterns like the morning and evening star.
Now, back to the hanging man. It's a spinning top with either a really short or no upper shadow and a long lower shadow. If it shows up during an uptrend or a price rise, that's when it's called a hanging man. But if it appears after a price drop or during a downtrend, it's known as a hammer. And guess what? These two patterns have totally different meanings! It's super important to pay attention to their position on a price chart to understand them correctly.
Let's talk about how the hanging man pattern is constructed. Like all candlestick patterns, it's built using four data points. The open and close are pretty close to each other, right near the top of the pattern, which makes the real body quite small. Oh, and the real body can be either black or white, but it's important that it stays small.
The hanging man also has this long lower shadow, usually about two or three times the length of the real body. The high and low of the candle (or, let's say, the trading day) are at the extreme ends of the price range for that day. As for the upper shadow, it might be there, or it might not. If it does show up, it'll be pretty small. Most of the time, though, the hanging man doesn't have an upper shadow, meaning the open or close and the high are the same. So, that's the hanging man for you - small real body, long lower shadow, and usually no upper shadow!
In a nutshell, the hanging man is a cool-looking candlestick pattern that can signal a possible reversal in an uptrend. It's like a snapshot of how investors' emotions are influencing the prices of a security, showing the high, low, opening, and closing prices for a certain period.
So, when do we see the hanging man in action? Well, two things need to happen: first, the asset has to be in an uptrend; second, the candle must have a tiny real body and a long lower shadow. When these conditions are met, you've got yourself a hanging man, and it's time to watch out for a potential change in the market!
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Disclaimer: This article was authored by Giottus Crypto Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.