What is Hanging Man Candlestick Pattern? How to Identify this pattern?

The Hanging Man Candlestick Pattern is one of the most common patterns in candlestick trading. Despite its unique name, this pattern is often confused with others. Today, we will help you better understand this pattern through the following article.

KEY TAKEAWAY

• The Hanging Man candlestick pattern, similar to a Hammer, appears at the top of an uptrend. It features a small body, a long lower shadow, and a minimal upper shadow.
• The Hanging Man candlestick pattern has a short body with a close near the open price, almost no upper shadow, and a very long lower shadow.
• Always combine the Hanging Man pattern with other indicators to avoid false signals.
• The Hanging Man pattern is a useful warning of sudden price changes, but like everything in crypto, it has its pros and cons.
• The Hanging Man is a strong reversal pattern but isn't always accurate

WHAT IS THE HANGING MAN CANDLESTICK PATTERN?

The Hanging Man candlestick pattern, also known as the Hanging Man candle, has a shape similar to the Hammer and appears at the top of an uptrend. This candle has a small body, a very long lower shadow, and nearly no upper shadow.

The lower shadow is typically 2 to 3 times the length of the body. It indicates that throughout most of the trading session, selling pressure was dominant. However, by the end of the session, buying pressure increased, pulling the price back close to its opening level.

FEATURES OF THE HANGING MAN CANDLESTICK

On Japanese candlestick charts, the Hanging Man is a single candle at the end of an uptrend, resembling a Hammer.

The pattern features a close price near the open price, creating a short body. The upper shadow is almost nonexistent, while the lower shadow is very long. The Hanging Man can be either a bullish or bearish candle, but a bearish candle provides a stronger indication of a potential reversal

HOW TO TRADE WITH THE HANGING MAN CANDLESTICK

If you spot a Hanging Man candlestick while analyzing the market, it is often seen as a signal to sell, as it indicates a potential bearish reversal at the end of an uptrend.

However, it’s important not to rely solely on the Hanging Man pattern. Using a single candlestick pattern for technical analysis can lead to false signals. For example, high buying pressure might still be present despite a sudden drop, meaning that buyers haven’t necessarily lost control.

Therefore, always combine the Hanging Man pattern with other indicators to avoid reacting to incorrect signals.

PROS AND CONS OF THE HANGING MAN CANDLESTICK

As we have seen, the Hanging Man candlestick pattern can be particularly useful as a warning of sudden price changes. However, like everything else in the cryptocurrency industry, this pattern has its own set of pros and cons. Here are the pros and cons of the Hanging Man candlestick pattern:

Pros:

• Indicates a trend reversal from bullish to bearish, alerting traders to a change in market sentiment.
• Easy to spot and identify due to its distinctive characteristics.
• Can be used to confirm resistance levels, verifying that the resistance is holding when forming near a strong resistance level.

Cons:

• The Hanging Man can provide false signals to traders. In such cases, traders might make incorrect decisions, leading to losses or missing out on better opportunities.
• It is essential to consider the overall market context before reacting to the Hanging Man pattern. Failure to do so can result in missing potential opportunities.
• Interpretation of the pattern can be subjective. Traders may vary in how they assess the strength and relevance of the pattern

IMPORTANT CONSIDERATIONS FOR THE HANGING MAN CANDLESTICK

The Hanging Man candlestick pattern is considered one of the stronger reversal patterns. However, it does not always provide accurate forecasts.

Therefore, investors should wait for one or two additional candles after the pattern. If these subsequent candles are bearish, the reversal signal becomes more reliable. Additionally, using other technical indicators to confirm the price trend is advisable.

And here is our complete explanation of the Hanging Man Candlestick pattern. This is one of the common patterns that all traders need to know. However, beginners may find reading patterns somewhat challenging. But don't worry, because you can check out the Klarda App, a new application that provides all the benefits and accurate advice, helping you get the quickest and most precise information.