What is a Hanging Man Candle in Technical Analysis?

Main features of Hanging Man candles:

• The candle body can be green (bearish candle) or red (bullish candle). Usually short and thin.
• The lower shadow of the candle is at least 2/3 or more of the length of the candle’s body.
• The upper shadow of the candlestick is short or does not appear.

Structural analysis of the Hanging Man candlestick pattern

What is a hanging man candle structure that you need to study carefully?

Small candle body:

• The body of the Hanging Man candlestick is usually very small. This shows a balance between buying and selling pressure during that time.
• Shows that the market is facing a confrontation between buyers and sellers. There is no clear dominant side.

The long shadow below:

• One of the unique characteristics of the Hanging Man candle is its long lower shadow. The length of the lower shadow represents the weakening of the growing buying and selling pressure.
• The long lower shadow can indicate a reversal from heavy buying pressure to selling pressure. Especially when the candle appears at the top of an uptrend.

Short shadow or no shadow at the top:

• The upper part of the Hanging Man candlestick usually has a short shadow or no shadow. Shows that selling pressure is trying to push the price down, but is not succeeding.
• Small body and long shadow at the bottom, with a short shadow or no shadow above. Creates an image of fighting between buyers and sellers, with the seller’s dominance increasing.

See more: Master the Forex “game” with Price action

Identify important factors of the Hanging Man candlestick pattern

Important factors contribute to the technical analysis of the Hanging M candle

• Small body
• Long shadow below
• Short shadow or no shadow at the top
• Confirmation from other factors
• Relationship to the general trend

Trading signals and strategies to use

Trading signals from the Hanging Man candlestick pattern are often used in reversal trading strategies and shaping market entry and exit points. Here are some trading signals and strategies using the Hanging Man candlestick pattern:

Buy and sell signals in technical analysis with the Hanging Man candlestick pattern

Sell ​​Signal:

• When the Hanging Man candle appears after a series of bullish candles and at the top of an uptrend, it can be a sell signal.
• Another approach is to place a short sell order (Short Sell) when the price crosses the bottom of the Hanging Man candle.

Buy Signal:

• In some cases, if the Hanging Man candle appears at the bottom of a downtrend and after a series of bearish candles, it can be a buy signal.

Use resistance and support levels for technical analysis

Support level:

• Support levels are price levels that seem likely to prevent a decline in the price of another currency pair or asset. These are often price levels where prices have reacted positively before.
• To identify support levels, look at the bottoms of the price chart and identify price levels where the price has had difficulty falling. Support levels can be notable price levels but are not necessarily horizontal.

Resistance level:

• Resistance levels are price levels that seem capable of stopping the rise in the price of a currency pair or other asset. These are levels where prices have had difficulty rising.
• To identify resistance, look at the tops of the price chart and identify price levels where the price has had difficulty rising. Similar to support levels, resistance levels also do not have to be horizontal.

Confirm trading signals, place orders and manage risk with candlestick patterns

*Confirm trading signals and place trading orders:

• Confirm the trading signal from the Hanging Man candle by waiting for confirmation from other factors such as support and resistance levels, trading volume, and other price patterns.
• A common way of confirmation is to wait for the next candlestick, confirmation (confirmation candlestick). If this candlestick has a red body and is large in size, indicating the dominance of sellers, then the sell signal from the Hanging Man candlestick should be stronger.
• Once the trading signal has been confirmed, the trader can place a buy or sell order based on the direction of the signal.

*Risk management:

Set command:

• After confirming the trading signal, you can place a buy order (if the buy signal is confirmed). Or sell order (if the sell signal is confirmed).

Risk management:

• Use the take profit level to determine the price at which you will take profit.
• Use stop losses to determine the price when the market moves against you. You will cut your losses to minimize your losses.

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Use other technical indicators in combination with what is a hanging man candle.

RSI line:

• RSI measures strength and provides buy/sell signals when it reaches overbought or oversold levels.
• When the Hanging Man candlestick appears at the top of an uptrend and the RSI shows an overbought signal, this can increase the accuracy of the sell signal.

MACD line:

• The MACD indicator provides buy/sell signals from the crossover between two moving averages.
• When the Hanging Man candle appears with a sell signal from MACD. This can increase the accuracy of the sell signal.
• For example: When the MACD line touches or crosses above the moving average.