Hanging Man Candlestick – Bearish Reversal Warning

Definition of Hanging Man

Hanging Man is a bearish reversal candlestick pattern that appears at the top of an uptrend. Its shape is identical to a hammer but signals an upcoming price decline.

How to Identify

• Small real body at the upper end.
• Lower wick at least 2-3 times the body length.
• Very short or no upper wick.
• Color can be green or red; red is more bearish.

[diagram:hanging-man]

Comparison with Hammer

Same shape but Hammer appears at the bottom of a downtrend (bullish), while Hanging Man appears at the top of an uptrend (bearish). Never confuse them!

How to Trade

1. Wait for confirmation: After the Hanging Man, wait for the next candle to close below the Hanging Man's body before selling.
2. Set stop loss: Above the Hanging Man's upper wick.
3. Target: Nearest support level or take profit when a bullish reversal appears.

Real Example

Suppose EUR/USD rises 200 pips, then a Hanging Man with a long lower wick forms. The next day price drops sharply – that's your sell signal.

Common Mistakes

• Entering immediately without confirmation.
• Confusing with Hammer by ignoring the prior trend.