What is Hanging Man Pattern?

 Hanging Man Pattern.

The hanging man is a bearish candlestick pattern that signals a potential reversal to the downside after an uptrend. It looks exactly like a hammer, but its meaning and context are completely different.

🔍 What Is a Hanging Man Pattern?

The hanging man is a single-candle pattern that appears at the top of an uptrend and suggests that buying momentum may be weakening, possibly leading to a trend reversal

Example.1:



Example.2:



Example.3:



.

📌 Key Characteristics:

  • Appears after an uptrend

  • Has a small real body near the top of the candle

  • Has a long lower shadow (at least 2x the body)

  • Has little or no upper shadow

  • Looks just like a hammer, but appears in a different context

🧠 Psychology Behind the Pattern:

  • During the trading session, sellers pushed the price down significantly.

  • Buyers managed to bring the price back up near the open.

  • However, the fact that sellers had control for much of the session signals weakness in the uptrend.

  • If the next candle is bearish, it confirms the reversal.

📊 Example of a Hanging Man:

Suppose a stock is rising:

  • It opens at $100

  • Drops to $92

  • Then rallies and closes at $99

→ This forms a hanging man:

  • Small real body near the top

  • Long lower shadow

  • Signals possible trend reversal if the next candle is bearish

⚠️ How to Trade the Hanging Man:

✅ 1. Wait for Confirmation

  • Don't trade immediately after the hanging man appears.

  • Look for the next candle to be bearish (red) and close below the hanging man’s body.

✅ 2. Entry Point

  • Enter a short position after confirmation.

✅ 3. Stop Loss

  • Place your stop loss above the high of the hanging man candle.

✅ 4. Profit Target

  • Use support levels, moving averages, or previous swing lows for setting a target.

🔁 Hanging Man vs Hammer (Comparison Table)

FeatureHanging ManHammer
Trend ContextAfter an uptrendAfter a downtrend
Signal TypeBearish ReversalBullish Reversal
Candle AppearanceSmall body, long lower shadowSmall body, long lower shadow
ConfirmationNeeds a bearish candle nextNeeds a bullish candle next

📌 Important Tips:

  • Volume can add weight to the pattern — a hanging man with high volume is more significant.

  • Always wait for confirmation before acting on this pattern.

  • Combine with other technical indicators like RSI, MACD, or support/resistance for better accuracy.

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