Hanging Man Candlestick
Candlefocus EditorThe structure of a Hanging Man candlestick is composed of a small body and a long lower shadow. The size of the real body can be either black or white, depending on whether the close of the session is higher or lower than the open. What’s more significant, however, is the size of the lower shadow, which should be at least twice the size of the body. This shows that there was a high degree of selling pressure, which shifted the market lower.
The presence of a long lower shadow in the Hanging Man pattern is a sign that the buyers have become exhausted and sellers have started to take control. In other words, it shows that the uptrend is losing its momentum and the market is likely to reverse soon.
In order for the Hanging Man to be considered a valid reversal signal, the price action needs to move lower on the following candle. This is known as confirmation, and it is a necessary step before entering a trade. Traders would typically prefer to exit long trades or enter short trades on the confirmation candle in order to take advantage of the changing market conditions.
In conclusion, the Hanging Man candlestick pattern provides an insightful look into the strength of an uptrend and can be used to alert traders of an impending reversal. It is important to bear in mind, however, that the pattern should not be acted upon until confirmation has been achieved.