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Hanging man candlestick pattern Profitable share market trading Strategies

The Hanging man

It is called a Hanging Man if a paper umbrella appears at the top end of a trend. It indicates a market high. This formation suggests strong sell pressure.

The colour of the hanging man does not matter as long as it has the correct ‘shadow to real body’ ratio. It is imperative that there was an uptrend beforehand, which is demonstrated by the curved line in the illustration. The idea behind the formation of a hanging man is this:

 

  1. The market is on an upward trajectory, with the bulls firmly in charge.

 

  1. The market has consistently increased, with ever-rising highs and lows.

 

  1. When the hanging man pattern is spotted, it serves as evidence that the bears have gained an entry in the market.

 

  1. This is further illustrated by the presence of a long lower shadow on the hanging man’s candlestick.

 

  1. The invasion of bears suggests that they are attempting to break the firm grip of the bulls.

As such, the dangling man implies that shorting the stock would be wise. This would involve executing a trade as follows:

 

  1. A risk-taker may begin a short trade around the closing price on the same day.

 

  1. For those who are risk-averse, it is possible to begin a short trade after confirming that a red candle will appear upon closing the following day.

 

  1. To validate the candle for both a risk-averse and risk-taker, the same procedure used in the hammer pattern is applicable.

After the short has been initiated, the candle’s peak provides an appropriate stoploss for trade. 

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