Reading stock charts isn’t always as easy as A, B, C. In fact, a lot of times it’s more like trying to decode some ancient language in a foreign script. That’s because, as with many dead languages, CONTEXT is paramount — and that’s especially true when comparing hanging men and hammers.
Hanging men and hammers are both single-candlestick formations that have virtually identical characteristics. However, one is bullish and the other is bearish. What is the difference between the two? CONTEXT.
Even in the English language, there are times when a word might mean one thing in one context and another in another context. We’re so accustomed to these double (or triple or quadruple!) meanings of words, they’ve become second-nature to us — just as the contextual meanings of words, phrases, and characters of ancient languages were second nature to the people who used them. Well, after studying this episode of TradingTips.com, the contextual differences between hanging men and hammers will be second nature for you, too!
In this episode, you’ll learn:
- The basic characteristics of a hanging man formation (0:35)
- How to interpret hanging men and what factors increase your probability of successfully trading them (1:09)
- How a hammer is similar to a hanging man — and the one key difference! (1:26)
In conclusion, it’s important to remember that hanging men and hammers are not opposites — they are in fact very similar. Their only real difference has to do with the CONTEXT in which they occur… And in this case, CONTEXT is definitely everything!
CEO, Wealthpire Inc.
P.S. Next week we’ll look the Rabbitt Q-Rank, an ingenious all-in-one stock evaluation system combining nine technical and fundamental models into one… See you next week!