A Hanging Man is a type of bearish reversal pattern, made up of just one candle, found in an uptrend of price charts of financial assets. It has a long lower wick and a short body at the top of the candlestick with little or no upper wick.
In order for a candle to be a valid hanging man, most traders say the lower wick must be two times greater than the size of the body portion of the candle and the body of the candle must be at the upper end of the trading range.
How to Trade Hanging Man Pattern?
Upon seeing such a pattern, consider initiating a short trade near the close of the down day following the hanging man.
• A more aggressive strategy is to take a trade near the closing price of
the hanging man or near the open of the next candle.
• Place a stop-loss order above the high of the hanging man candle.
What Does Hanging Man Tell You?
• A hanging man represents a large sell-off after the open which sends the price plunging, but then buyers push the price back up to near the opening price.
• Traders view a hanging man as a sign that the bulls are beginning to lose control and that the asset may soon enter a downtrend.
• Place a stop-loss order above the high of the hanging man candle.
What Does Hanging Man Tell You?
• A hanging man represents a large sell-off after the open which sends the price plunging, but then buyers push the price back up to near the opening price.
• Traders view a hanging man as a sign that the bulls are beginning to lose control and that the asset may soon enter a downtrend.
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