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Posted on February 3rd, 2025
A green Hanging Man candlestick pattern indicates a session in which prices opened lower, rose significantly and closed just above the opening price. Bullish reversal patterns appear at the bottom of a downtrend, signaling that sellers are exhausted and buyers are stepping in to launch an upward move. The candle’s real body (the thick part between the open and close) represents the final settlement of that negotiation.
The red bearish hangman is considered a stronger bearish signal of the two. Moreover, the rule of two applies to it, just like with other candles. It means that the signal sent by one bearish hanging candlestick gets confirmed only when another bearish candle is formed either on the same day or the next.
This strategy is versatile and can be used with most oscillator-type indicators, such as the Relative Strength Index (RSI). For the sake of simplicity, we will use the RSI divergence to explain this strategy, as the RSI is one of the most popular indicators among traders. First, identify a hanging man as the price nears a resistance area, where rejection is likely. Then, upon the formation of a hanging man, followed by a red/black candle, enter a short targeting the next support zone. A fantastic example of a hanging man pattern can be found on the Silver Futures 1D Chart in May 2021. To avoid getting trapped by the hanging man, let’s learn all about what this pattern indicates, and how we can trade it.
The Hanging Man has a small body near the top of the candlestick and a long shadow, distinguishing it from the Shooting Star. The color of the body does not matter, it can be either red or green (bearish or bullish). This pattern can appear even when the market continues to grow, especially if the uptrend is very strong. This pattern gets its name from the visual resemblance to a figure with long legs. The Hanging Man candle is not so alarming at first glance because the price has not fallen sharply.
A hanging man candle is typically a bearish reversal pattern near resistance levels. Interestingly, there was another gap up above the hanging candle, which was filled by a large shooting star, signaling that a bearish reversal was about to take place. When the reversal happened, it turned into a large, bearish megaphone pattern. Hanging man candles can also look like spinning tops with an upper wick.
Hanging man candlesticks form when the end of an uptrend is occurring. The Hanging Man candlestick pattern is one of the simplest tools to spot likely turnarounds in an uptrend. It ought not to be applied by itself, but merged with major technical analysis such as the use of RSI, MACD, and volume indicators. When utilized well, this pattern can produce a success rate of 37,2 – 86%. With proper risk management and a firm strategy, it can be a useful tool in the hands of any committed trader.
You can find the hammer candlestick pattern at the bottom of a bearish trend looking to turn bullish. For more information, check out the following TRADEPRO Academy article. Just like any other trading criterion, if it’s used alone, the likelihood of success decreases. Also if it’s used in conjunction with too many other indicators or criteria, information overload could be created. The hanging man candlestick pattern is no exception to these expectations.
Furthermore, a trader needs to understand that the smaller a candlestick body is and the longer its lower shadow is, the stronger is the reversal signal. Hanging man is a reversal candlestick pattern that predicts the ongoing change from the uptrend movement to the downtrend one. The Hanging Man and Shooting Star candlesticks are both bearish reversal patterns but differ in their appearance and context within the trend. The Evening Star candlestick is a three-candle pattern that signals a stronger bearish reversal with a bullish candle, a small indecisive candle, and a confirming bearish candle. Spotting the hanging man candlestick in an uptrend is straightforward once you know what to look for. This pattern only matters when it forms after a clear upward move, because its meaning depends on fading bullish momentum.
To avoid mistaking a Hammer for a Hanging Man, pay attention to the trend leading up to the candlestick. • The Hanging Man appears at the peak of the chart after prices have risen and signals a possible market decline. Setting your SL equal to or less than the ATR value often leads to early exits.
Our watch lists and alert signals are great for your trading education and learning experience. The Bullish Bears trade alerts include both day trade and swing trade alert signals. These are stocks that we post daily in our Discord for our community members. People come here to learn, hang out, practice, trade stocks, and more. Our trade rooms are a great inverted hanging man candlestick place to get live group mentoring and training.
You should carefully consider if engaging in such activity is suitable for your own financial situation. TRADEPRO Academy is not responsible for any liabilities arising as a result of your market involvement or individual trade activities. This guide will explore the nuances of the Hanging Man pattern, compare it with similar patterns, and provide practical trading tips. Yes, the Hanging Man candlestick chart can be used in day trading, especially when it appears on shorter time frames like 5-minute or 15-minute charts. When these elements align, the hanging man pattern becomes a reliable indication that buyers are losing control and a reversal may begin. The candle itself shows early selling pressure, but traders always combine it with confirmation before acting.
However, traders can use this understanding as an additional confluence to analyse whether they will enter a short trade, or stay on the sidelines for another better opportunity. When flipped vertically, an inverted hanging man would have a long upper shadow and a small candle body at the bottom of the candlestick. This pattern is recognised as either the “inverted hammer” or the “shooting star” pattern depending on where it forms within the trend. When combined with the hanging man candlestick pattern, the RSI is a powerful indicator that can increase the strength of a bearish reversal when a bearish divergence is spotted.
An inverted hammer candlestick pattern is the same as an upside down hanging man candlestick and is a hybrid. As mentioned earlier, the hanging man is considered a bearish reversal pattern. In essence, the hanging man candlestick chart shows a battle between eager sellers and increasingly weak buyers. Sellers were able to drive prices lower intraday but lacked the momentum to sustain the down move. Spotting this ominous candlestick pattern forms on your hanging man candlestick chart can tip you off that upside momentum is waning.
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