Hanging Man Candlestick Pattern

What the Hanging Man pattern means

It has the same shape as a hammer, but context flips its meaning. After an uptrend, the long lower wick shows sellers were able to push price down sharply mid period. Even though buyers recovered the close, the appearance of strong selling is a warning that the trend may be topping.

How the Hanging Man is traded

• →Wait for a bearish confirmation candle that closes below the hanging man's body before shorting or exiting longs.
• →Most meaningful after an extended uptrend or at resistance.
• →Stop goes above the hanging man's high.
• →Many traders use it to manage existing longs rather than to enter new shorts.

Common mistakes

• ✕Treating it as bullish because it looks like a hammer.
• ✕Shorting without confirmation in a strong uptrend.