What is Hanging Man Candlestick Pattern? What is Its Purpose?

The formation of the Hanging Man Candlestick can definitely be predicted with its title, a bearish symbol. The pattern of this sign exists basically at the top of up-trends. It can be considered as the alarming sign of the possible reversal downward. It is vital to note that the pattern of Hanging Man is the alarming sign of the sudden price change in future. So, don’t confuse it with the signal of shortage. The formation of the Hanging Man just looks like a Hammer. It is made when high, open and close have same price. It also has a long shadow which must be around double the length of actual body.

When the open and the high are same, the bearish sign of the Hanging Man candlestick is made. It is known as the robust bearish sign. The bullish Hanging Man is formed when the close and the high are the same. However, the bullish sign of Hanging Man still remains bearish. After a several week long up-trend, the Hanging Man is formed bearish as the prices are changed by reducing drastically in the day. The buyers come back on the stock and push the price around the open. But it is true that the prices tend to fall drastically and it shows that the bears are being tested to resolve the bulls.

What happens next is the day after the pattern of Hanging Man gives an insight to the traders as to whether the prices would go down or higher. This bearish reversal sign is made with just one candlestick and is majorly found in financial assets’ uptrend on the price charts. The Hanging Man has a short body and long lower wick with no or small upper wick. The candle’s body should be at the upper end.