963.306.674 / 96.325.57.33 / info@thelearningbus.es

Hanging Man Candlestick Pattern Trading Strategy and Backtest Definition & Meaning

wait for confirmation

Therefore, it follows that these are ideal patterns to use as a basis for trading. Another distinguishing feature is the presence of a confirmation candle the day after a hanging man appears. Since the hanging man hints at a price drop, the signal should be confirmed by a price drop the next day. That may come by way of a gap lower or the price simply moving down the next day . According to Bulkowski, such occurrences foreshadow a further pricing reversal up to 70% of the time. This candlestick chart pattern has a small real body which means that the distance between the opening and closing price is very less.


Emotions and psychology were paramount to trading in the 1700s, just as they are today. This is the foundation of why candlesticks are significant to chart readers. In his books, Nison describes the depth of information found in a single candle, not to mention a string of candles that form patterns. In this article, we’ve covered the meaning of the hanging man pattern, how to spot it, and provided a couple of trading strategies that you could use for inspiration. The patterns are calculated every 10 minutes during the trading day using delayed daily data, so the pattern may not be visible on an Intraday chart.

Of these two approaches, the first one is probably the most widely used. Here you simply look at the volume when the pattern was formed, and compare that to volume of the surrounding candles. Now, some patterns might not work that well on a certain day of the week. It could be that certain days have a bearish or bullish bias, that skews the results. Most traders who use patterns such as the Hanging Man don’t take a trade as soon as they see a pattern. With most patterns, that’s not an option that will lead to profitable trading.

Hanging Man Candlestick Pattern (How to Trade and Examples)

The red body of the candle indicates that the price could not return to the levels at which the trading session began. The hanging man candle does not necessarily indicate the price reversal. Wait for this pattern to be confirmed by identifying other bearish patterns. The real body of this pattern is at the upper end of the entire candlestick and has a long lower shadow.


In addition, ensure that you place your stop at the high of the hanging man candle formation. On 20 February 2020, the Twitter stock made a green candle hanging man. Even though its size was small, due to strong supporting signals, it could drag down the price. In this case, the reversal doesn’t occur immediately after the hanging man is formed, but the price action moves from a bullish trend to a consolidation phase. Ultimately, the price moves to the downside to print even lower levels than during the first pullback. Thus, the rise of bears can only occur at the expense of the bulls, who have been in control of the price action up to this point.

Hanging Man Candlestick Pattern – What you should know?

Correct interpretation of the Hanging Man pattern requires thorough analysis of the market on the chart. The meaning of the pattern will be stronger if it occurs in a significant resistance zone. As every one-line pattern, it must be confirmed in two or three consecutive candles, which closing prices should be lower than the closing price of the pattern. However, as with other peak patterns, many active market players open positions without waiting for any confirmations.

  • https://g-markets.net/wp-content/uploads/2021/04/Joe-Rieth.jpg
  • https://g-markets.net/wp-content/uploads/2020/09/g-favicon.png
  • https://g-markets.net/wp-content/uploads/2021/09/image-wZzqkX7g2OcQRKJU.jpeg
  • https://g-markets.net/wp-content/uploads/2021/04/Joe-Rieth-164×164.jpg
  • https://g-markets.net/wp-content/uploads/2021/09/image-Le61UcsVFpXaSECm.jpeg
  • https://g-markets.net/wp-content/uploads/2021/09/image-KGbpfjN6MCw5vdqR.jpeg

A stop-loss can be placed at the highest point of the this candlestick. Usually, pattern with longer lower shadows seems to have performed better than the Hanging Man with shorter lower shadows. Note the trend is mostly sideways in this first circled example.

Candlestick Pattern

One can see the absence of an upper shadow and a long bottom shadow. Such a unique pattern allows day traders to square their position to enter a short position. The Hanging Man candlestick pattern has a body that is shorter and flat at the top.

The chart shows a price decline, followed by a short-term rise in prices where a hanging man candle forms. Following the hanging man, the price drops on the next candle, providing the confirmation needed to complete the pattern. During or after the confirmation candle traders could enter short trades. The hanging man pattern occurs after the price has been moving higher for at least a few candlesticks.

The open tells us where the stock price opens at the beginning of the minute. The wicks represent the highest and lowest recorded price from the open and close. Every candle reveals a battle of emotions between buyers and sellers. Another way of defining that the bullish trend is coming to an end is with the ADX indicator. You enter too late, and the market already has made its move, leaving you with a loss.

A hanging man is a type of https://g-markets.net/ pattern in financial technical analysis. It is a bearish reversal pattern made up of just one candle. It has a long lower wick and a short body at the top of the candlestick with little or no upper wick. The bearish inverted hammer candlestick pattern is often referred to as a shooting star. While it resembles the regular inverted hammer, it signifies a possible bearish reversal rather than a bullish one. In essence, shooting star candlesticks are inverted hammers that appear at the end of an uptrend.

Sure, it is doable, but it requires special training and expertise. To that end, we’ll be covering the fundamentals of candlestick charting in this tutorial. More importantly, we will discuss their significance and reveal 5 real examples of reliable candlestick patterns. Along the way, we’ll offer tips for how to practice this time-honored method of price analysis. An uptrend was happening , but then the bears stepped up and drove the price down.

If the body of the candle is black, this pattern is slightly more reliable and the results will be more bearish. Zooming in a little further making use of the shorter, 4 hour chart , you will be better equipped to spot the ideal opportunity to enter the trade. However, the price dropped due to strong signals confirming it.

MintGenie Explains: Five bearish candle patterns in the stock market Mint – Mint

MintGenie Explains: Five bearish candle patterns in the stock market Mint.

Posted: Tue, 05 Jul 2022 07:00:00 GMT [source]

Please read theRisk Disclosure Statementprior to trading futures products. The “doji’s pattern conveys a struggle between buyers and sellers that results in no net gain for either side,” as noted in this great article by IG.com. The stock opens, proceeds lower as bears are in control from the open, then rips higher during the session.

Engulfing Patterns

A top candlestick reversal pattern that requires confirmation. But when this line appears dur­ing an uptrend, it becomes a bearish hanging man. In principle, the hanging man’s lower shadow should be two or three times the height of the real body. An inverted hammer candlestick is a another pattern that forms at the end of a downtrend, indicating a potential trend reversal.

You should consider whether you can afford to take the high hanging man candlestick pattern of losing your money. Although the green Hanging Man is still bearish, it’s considered to be less so because the day closed with gains. The long lower shadow of the hanging man shows that sellers were able to take control for part of the trading period. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts.


With volume you don’t only get to know how the market moved, but also the conviction of the market. Having access to that information in your analysis could add a lot of extra value, in certain cases. Instead, you will have to find the right timeframe and market where the pattern works, and then apply filters to increase the profitability of the signal.

Originally used in the 1700s by rice traders in Japan, candlesticks have gained popularity in the West for their picturesque terms and easy interpretation. A red Hammer candlestick pattern at the bottom of a downtrend is a bullish signal that a possible uptrend may occur. The red signifies that the asset’s price dropped during the trading day. According to the book Encyclopedia of Candlestick Charts by Thomas Bulkowski, the Evening Star Candlestick has a 72% chance of accurately predicting a downtrend. The Evening Star is a bearish reversal pattern that occurs at the top of an uptrend.

The difference is that the small real body of a hanging man is near the top of the entire candlestick, and it has a long lower shadow. A shooting star has a small real body near the bottom of the candlestick, with a long upper shadow. The price pattern of a hammer and a hanging man is exactly the same, but their interpretation is completely different. It is a bullish reversal pattern because it shows that the market sold off during the session, but then bulls came in and drove price higher. The hanging man comes after a price advance, it is bearish because it shows that price had been advancing over successive days. But then on the day the hanging man formed, bulls were at first in control.

Another possible entry level could be to enter the trade once the market has moved past the low of the hanging man candle. More over, traders should use proper risk management techniques, such as stop-loss orders, to minimize losses. By following these tips and tricks, traders can make more informed decisions when trading hammer candlestick patterns. Hammer candlestick patterns have a small body and a long lower wick, with the wick at least twice the size of the body.