Candlestick patterns are the best way to read the sentiment of the market. Candlestick patterns are vital in Technical Analysis and are trusted by most seasoned traders. An Inverted Hammer Candlestick pattern is one of the most popular and trusted patterns. In this article, we will try to understand what a Hanging man candle is, What it does Signy and How to trade with it.
What is a Hanging Man Candlestick?
A Hanging Man is a single Candlestick pattern generally found at the top of an uptrend. A hanging man Candle has a long wick on the downside and a small body with little or no wick on the upside.
Here is an Example
A hanging man candle is considered a bearish candle, which marks the end of an uptrend and the potential beginning of a new downtrend.
What does it indicate?
A Hanging man is formed on the top of an uptrend. This means until that point. Then, the Bulls were in control. The long shadow of a Hanging man Indicates that the Bears are gaining strength in the market, indicating that bulls are no longer in control, and the trend may soon reverse.
How can you use Hanging Man Candlesticks?
A hanging pattern on the top, With a long wick followed by a bearish candle, has the best chance of price moving to the downside, which is How we will try to use it in a trading setup.
When you observe a hanging man candle on the top of an uptrend, mark the top of the candle as a potential Stop loss. Then, wait for the next candle to break the low point of the hanging man candle. You can take a short position if you see the price sustaining below the low point of the hanging man candlestick.
It is to be noted that while a hanging man is a very trustworthy candlestick pattern. It would be best if you always used it in a broader trading system in conjunction with other tools and indicators.
The hanging man candlestick is a bearish reversal pattern. By looking for this candlestick pattern, you can spot potential reversals and enter into short positions. However, it is essential to note that the hanging man does not always guarantee a bearish reversal and should be used with other technical indicators and tools.