Hanging Man Candle, do you know its characteristics? There are many types of candlesticks that will appear on the trading chart. And one of them is this hanging man candlestick. If previously we have discussed other types of candlesticks, then this time we will learn about the hanging man candlestick itself. Hanging Man Candle is a reversal signal from a bearish direction with a strong resistance level range.

When the price has reached its peak, the hanging man pattern will indicate that the number of selling traders will begin to exceed the number of buying traders themselves. For more on this hanging man candle, you can continue reading this article. However, before you continue reading, don't forget to trade on GIC by downloading the GICTrade application on the Play Store or App Store.

What is Hanging Man Candle?

Hanging Man is one type of candlestick pattern. The candlesticks themselves will display the highest, lowest, opening, and closing prices for a security over a certain period of time. These candlesticks will reflect the impact of investor emotions on a security's price and will be used by some technical traders to determine when to enter and exit a trade.

The term “hanging man” refers to the shape of the candle and also what is implied from the appearance of this pattern. The hanging man represents a potential reversal in an uptrend. While selling an asset based solely on the hanging man pattern is a risky proposition, many believe it is key evidence that market sentiment is changing. The strength of the uptrend is no longer there.

The hanging man candlestick pattern is the opposite of the hammer candlestick. If the candlestick appears during an uptrend, it will signal a reversal by becoming a downtrend and later the candlestick can become a resistance line. The Hammer and Hanging Man patterns will look exactly the same but still have different meanings when the price movement is downtrending or uptrending.

Both will have the same shape like a hammer, with a small body and also a long axis below that exceeds the size of the body. The difference is, the Hammer pattern will appear when the price is experiencing a downtrend with a hammer shape (body) that is white, while the Hanging Man will appear during an uptrend with a shape that resembles a hammer (body) and is black.
 
The most important point is, this hanging man candle has a long lower shadow 'tail', and also a small upper shadow or even no upper shadow at all. This hanging man can be found after the end of a bullish trend, and usually will indicate a 'peak' in an uptrend that will be followed by a price fall. Sellers will start to get 'energy' to be able to push prices down.


Although the price can rebound before the candle closes, this hanging man pattern must be taken as a serious warning. The uptrend will start to weaken, and buyers may not have enough strength to maintain the price at a high level the next day. Before continuing to the criteria of the hanging man candle, do a Preliminary Test to measure your trading talent so far.

Hanging Man Criteria

The hanging man is characterized by a small “body” facing upwards with a long lower shadow. The lower shadow should be at least twice the length of the body. A hanging man pattern with above-average volume, a long lower shadow by the selling day will have the best chance of producing a lower price move.
 
Therefore, this is an ideal pattern to trade. Hanging man patterns will occur frequently. If you highlight them all on a chart, you will find that for the most part they are a poor predictor of lower price action. So look for increased volume, selling the following day, and a longer lower shadow, and the pattern can become more reliable. Use a stop loss above the hanging man high if you are going to trade them.
  • The asset has been in an uptrend.
  • The candle will have a small real body (the distance between the open and close) and a long lower shadow. There will be little or no upper shadow.
  • The lower shadow is about 2 to 3 times the length of the body.
  • Little or no shadow on top of the body.
  • The body position will be above the top of the range.
  • The body color is not too important, only that the black color will indicate a more bearish condition when compared to the white color.

Hanging Man Example

When a hanging man forms in an uptrend, it indicates that buyers have lost their strength. While demand has been pushing the stock higher, there was significant selling today.

While buyers have managed to bring the price back up to near the open, the initial selling is an indication that more and more investors believe the price has peaked. For those who believe in trading this candlestick pattern, it provides an opportunity to sell existing long positions or even sell in anticipation of a price decline.

The hanging man will be characterized by a small “body” above a long lower shadow. The lower shadow should be at least twice the length of the body.

The chart below will show two hanging man patterns on Meta ( FB ), formerly Facebook stock, both of which will cause at least a short-term move lower. The long-term direction of the asset will not be affected, as the hanging man pattern is only useful for gauging short-term momentum and price action.

 

Contoh grafik candlestick pria gantung

While traders often rely on candlestick formations to detect individual stock movements, it is also appropriate to look for candlestick patterns in indices, such as the S&P 500 or the Dow Jones Industrial Average. Candlesticks themselves can also be used to monitor momentum and price movements in other asset classes, including currencies and futures.

The hammer will provide a warning of a possible change from a downtrend to an uptrend. The longer the lower shadow, the greater the likelihood of a reversal. Likewise, if the hammer appears in an area close to the support level, the greater the likelihood of a reversal.

As another example, the hammer that occurs on the DBX index below. After a downtrend, a hammer will appear. After this hammer, the DBX index is experiencing an uptrend.
 
 
Hanging man will give a warning about the possibility of a change from uptrend to downtrend. Just like hammer, the longer the lower shadow, the stronger the possibility of a reversal. An example is the hanging man that occurred on the KOSPI 200 index. After the appearance of this hanging man, the KOSPI 200 index experienced a downtrend.
 
 
After learning about the example of a hanging man candle, don't forget to register as an IB or invite your friends to join GIC by becoming traders and get additional income from it.

Difference Between Candle Hammer and Hanging Man

Hammer and Hanging Man are actually twins. Both forms of candlesticks are physically almost the same, but still have different meanings when viewed from the process of the last price activity in a session. In this pattern, both will have the same shape like a hammer, with a small body and a long wick below that exceeds the size of the body.

The difference is, the Hammer pattern itself will appear during a downtrend with a white hammer shape (body), while the Hanging Man will appear during an uptrend with a black hammer shape (body). Although often considered to have low accuracy because it is a pattern of 1 candle, the Hammer and Hanging Man still have an important meaning that will imply a change in market strength at the time before a change in trend direction occurs.

When the price has fallen, the hammer will signal that the price is opening and closing at adjacent levels. The long wick below will indicate strong seller pressure, but buyers will eventually dominate the fight because the price closes above the opening level (white body). This is what will then cause the formation of the Hammer pattern.

On the other hand, when the hammer is formed while the price is rising, then the long wick below will indicate a strong seller push. Buyers will try to maintain their position, but will eventually give up and let the sellers win the fight. This can be seen from the body of the hammer which will then turn black, and indicate that the price will close at a lower level than the price at the time of opening. This is what will cause the formation of a Hanging Man pattern.

The difference between the hammer and the hanging man will only lie in their location, where the hammer is always located in the valley, while the hanging man will always be at the top. The appearance of this hammer is a bullish signal, while the appearance of the hanging man itself is a bearish signal.

This hammer will be a strong bullish signal if it is supported after the emergence of a bullish candle. Likewise with the Hanging man, this pattern will be a stronger bearish signal if supported by a bearish emergence on the candle after it.

How to Trade Using Hanging Man Candles

It is important to be able to see the hanging man candle formation in relation to a long-term trend. The best way to do this is by using multi-time frame analysis. Start by looking at a market using a longer time frame chart such as daily or weekly to be able to see the direction of the long-term trend in the market.

Then, zoom in by using a chart on a smaller time frame such as, 4 hours or 2 hours, to be able to analyze the ideal entry point for your trade. Step 1: Identify the long-term trend Look at a chart on a longer time frame (for example, a daily chart) to be able to get an idea of ​​the direction the market is headed. You don't want to place a trade in the opposite direction of the long-term trend.

Step 2: Finding the ideal entry point Utilizing a shorter time frame chart (4-hour chart), is the identification of the ideal entry point. The formation of this hanging man candle will give us a signal in a short trade. Step 3: Utilizing the support indicator Can the RSI confirm that the market has turned and is now in a downtrend? Has the 20 SMA line crossed the 50 SMA line? Is this hanging man candlestick appearing near the top of a short-term uptrend? Are there any relevant Fibonacci retracement levels? Step 4: Place your trade Look for an entry point at the bottom of the hanging man candlestick.

If your bearish view of the market is correct, then you will see the subsequent price action moving down, giving you an indication to enter a short trade. Step 5: Risk management Make sure that you can place your trades in accordance with your overall position strategy. Consider how much of your total account value you are prepared to risk at any given time and do not deviate from this.

Also, make sure to stop at the top of the hanging man candle formation. Step 6: When to close the trade? Whenever entering a trade, it is always best to have a risk to reward ratio of at least 1:2. You should risk half of what you stand to gain. This means that the distance from your entry level to your take profit level should be twice the distance from your entry level to your stop loss level. Applying this simple technique means that even if you only get half of your trades right, you will still have a positive trading account.

Related Topic

Here are some questions related to hanging man candles and are usually asked by traders. These questions are:

Candlestick Hammer

Hammer is a price pattern in candlestick charts that will occur when a security is trading significantly lower than its opening price, but rallies in the closing period near the opening price. This pattern will form a hammer-shaped candlestick, where the lower shadow is at least twice the size of the actual body. The body of the candlestick represents the difference between the opening and closing prices, while the shadows will show the high and low prices for the period.

  • This hammer candlestick usually occurs after a price decline. They have a small real body and also a long lower shadow.
  • This hammer candlestick will occur when sellers are entering the market during a price decline. When the market has closed, buyers will absorb the selling pressure and also push the market price to approach the opening price.
  • This close can be above or below the opening price, although the close must be near the open so that the body of the actual candlestick will remain small.
  • The bottom shadow should be at least twice the height of the actual body.
  • The hammer candlestick will indicate a potential upward price reversal. The price should start moving up following the hammer; this is called confirmation.

Inverted Hammer

This inverted hammer candlestick is a bearish reversal pattern that will indicate selling pressure from initially falling and then increasing. This pattern will form when buyers put pressure on the market so that it will indicate a bullish trend that drives up asset prices. The inverted hammer is a popular candlestick pattern among technical trader who can find entry, exit, and stop-loss times when trading.

In addition, this inverted hammer pattern can also appear well in both uptrends and downtrends. Compared to other candlestick patterns, this pattern is indeed quite a rare pattern because it will represent the hesitation of whether the market will go up or down. This pattern will also be slightly more complex than other candlestick patterns, which will make it more difficult to recognize.

However, the inverted hammer itself is one of the most reliable candlestick patterns to indicate that the price has bottomed out and will soon start rising again. After knowing how the hanging man candle itself is and the candlesticks related to it, now you can recognize how the hanging man candle is.

Don't forget to also learn how to trade this hanging man candle. In addition, do a Trader Assessment to be able to consult with GIC and ask anything about trading for both beginners and professionals. You can also find other examples on various media of how the hanging man candle itself occurs. And don't forget to do an internal survey so that GIC can also improve and get suggestions from users about the platform we have created.