The Hanging Man pattern is a bearish reversal candlestick pattern that appears at the top of an uptrend, indicating potential weakness in buying momentum. It has a small real body, a long lower wick, and little to no upper wick, resembling an inverted hammer.

Understanding the Hanging Man Pattern

The pattern forms when the price opens higher, declines significantly during the session, but recovers to close near the opening price. The long lower wick shows that sellers attempted to push the price lower, but buyers brought it back up. However, the recovery may be temporary, signalling a potential reversal.

For example, if a stock is in an uptrend and forms a Hanging Man with an open at £100, a low of £95, and a close at £99, it suggests that selling pressure is increasing.

Key Characteristics of a Hanging Man Candlestick

• Small Real Body – The open and close prices are close to each other.
• Long Lower Wick – At least twice the size of the body, showing selling pressure.
• Minimal or No Upper Wick – Indicates weak buying continuation.
• Appears in an Uptrend – Its significance increases when found at the top of an uptrend.

How to Trade the Hanging Man Pattern

1. Identify the Hanging Man in an Uptrend – Look for a small body with a long lower wick after a price rally.
2. Confirm with Volume – Higher volume on the Hanging Man increases reliability.
3. Wait for Bearish Confirmation – A strong red candlestick following the Hanging Man confirms the reversal.
4. Enter a Short Trade – If confirmation occurs, traders may consider a short position.
5. Place a Stop-Loss Above the Hanging Man – Protect against false signals.

Common Challenges in Trading Hanging Man Patterns

• False Signals – A Hanging Man alone is not a guaranteed reversal.
• Needs Confirmation – Always wait for a bearish candle before entering a trade.
• Market Context Matters – Works best near resistance levels.

Hanging Man vs. Other Candlestick Patterns

Pattern	Trend Direction	Signal Type	Key Difference
Hanging Man	Uptrend	Bearish Reversal	Small body, long lower wick
Hammer	Downtrend	Bullish Reversal	Small body, long lower wick
Shooting Star	Uptrend	Bearish Reversal	Small body, long upper wick
Inverted Hammer	Downtrend	Bullish Reversal	Small body, long upper wick

Best Practices for Trading the Hanging Man Pattern

• Look for Resistance Levels – A Hanging Man near key resistance levels has a higher chance of success.
• Wait for a Bearish Confirmation Candle – A strong red candle after the Hanging Man confirms the pattern.
• Use Stop-Loss for Risk Management – Set it above the high of the Hanging Man.
• Combine with Other Indicators – RSI, MACD, and moving averages help validate the signal.

FAQs

What does a Hanging Man candlestick indicate?

It signals a potential bearish reversal at the top of an uptrend.

How do you confirm a Hanging Man pattern?

Look for a bearish candlestick after the Hanging Man and check volume for confirmation.

Is a Hanging Man the same as a Hammer?

No, a Hanging Man appears in an uptrend (bearish), while a Hammer appears in a downtrend (bullish).

Does a Hanging Man always lead to a downtrend?

Not always. It requires confirmation from additional bearish price action.

Where should a Hanging Man appear?

It should appear at the top of an uptrend for the best reversal signals.

Can a Hanging Man candlestick be green?

Yes, but a red Hanging Man with high volume provides a stronger bearish signal.

What is the difference between a Hanging Man and a Shooting Star?

A Hanging Man has a long lower wick, while a Shooting Star has a long upper wick.

What timeframes work best for the Hanging Man pattern?

Daily and 4-hour charts provide stronger signals, but it can be used on lower timeframes.

Should I short immediately after seeing a Hanging Man?

No, wait for bearish confirmation before entering a short trade.

What indicators complement Hanging Man trading?

RSI, MACD, and trendline analysis help confirm the pattern.

The Hanging Man pattern is a key bearish reversal signal that warns of potential price declines. However, traders should always confirm the signal with additional indicators before making trading decisions.