The Hanging Man candlestick is one of the most recognized bearish reversal patterns in technical analysis. It warns traders that an uptrend may be losing strength and that a potential downtrend could follow. Understanding how to spot, confirm, and trade this candlestick can help traders protect profits and manage risk effectively.
What is a Hanging Man Candlestick?
The Hanging Man is a single candlestick pattern that forms after an uptrend. It has:
- A small real body/candle near the top,
- A long lower shadow/wick (at least twice the size of the body),
- Little to no upper shadow/wick (less than 10-20% of the body to even zero).
This structure shows that sellers drove prices down during the session, but buyers managed to push them back up near the open. Despite the recovery, the presence of heavy selling pressure signals that bullish momentum may be fading.
How to Identify a Hanging Man Pattern
To recognize the Hanging Man, look for these characteristics:
- Appears after a sustained uptrend.
- Lower shadow is at least twice the body size.
- Real body is positioned at the top of the range.
- Minimal or no upper shadow.
Here’s a visual guide for the upper shadow size on a Hanging Man candlestick:
Left: Valid → tiny or no upper shadow.
Middle: Borderline → small but noticeable upper shadow (can still count if lower shadow dominates).
Right: Invalid → upper shadow too long, breaks the “hanging man” look.
What Does the Hanging Man Indicate?
The pattern suggests that buying pressure is weakening. If confirmed by further technical indicators, it may indicate the beginning of a trend reversal from bullish to bearish.
Disadvantages of the Hanging Man Candlestick
Can produce false signals in volatile markets.
Must be confirmed with other indicators like RSI, MACD, or volume.
Less reliable if market conditions are sideways or uncertain.
Trading Strategy with the Hanging Man
- Find the pattern: Look for the candlestick after an uptrend.
- Confirm the reversal: Use tools like support breaks, trendlines, or oscillator indicators.
- Plan the trade: Exit long positions or cautiously enter a short.
- Risk management: Place stop-loss orders if placing buy orders (in case there is a reversal) or if selling place stop-loss above the candlestick’s high (in case the reversal doesn’t take place as expected).
Final Thoughts
The Hanging Man candlestick is not a guaranteed reversal signal, but it’s a powerful warning sign. Traders who combine it with confirmation indicators can gain a significant edge in identifying potential bearish shifts
