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@ Halima, valid point, hanging man is reversal and found at the end of the bullish trend. In this example until upto the prior 2 candles it is bullish trend even though the trend is small.
The rationale behind this short trade.,
– it is bullish trend though its is small
– the first red candle is dark cloud cover with low volume
– the second one is doji which shows indecisive
– the third one is hanging man which I see as confirmation for reversal
If you go by book this is not a hanging man since its didnt appear at the top of the bullish trend but 2 candles later. My idea is be flexible with patterns at the same time within the limits.
@ Murugan, the engulfing itself is immature to place the trade. But I have considered the prior 3 candles which is inverted hammer, spinning top and hanging man respectively which occurs in the bullish trend which can be signs of reversal and the bearish engulfing is the 4th candle and I saw it as confirmation for the trend reversal based on 3 prior candles.
By all means the trade went in opposite direction and ideally if I would have placed entry below the low of the bearish engulfed candle the order would have never got executed.
Thanks for looking into this and sharing your feedback, really appreciate that.
@ EQSIS, Yes the entry is wrong, should be below the low of the engulfed candle (1011). This is failed bearish engulfing.
@ Halima, I will try and mark the prices in the image. Thanks for your feed back
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