The Ultimate Guide to Hanging Man Candlestick Patterns

Last updated: January 4, 2024

Hanging Man Pattern

This pattern signals a potential downward reversal if occurring after a strongly bullish price movement while appearing just like the hammer candlestick:

The long lower shadow of the candle shows that the stock attempted to sell off during the trading session, but the demand for shares helped bring the stock back up, closer to the opening price, with a green candle indicating the stock managed to close higher than the open, and a red candle indicating that the stock wasn't able to close higher than it opened.

Chart

General Identification & Interpretation

Steve Nison is credited with bringing Japanese candlestick charting to the West. In his book "Japanese Candlestick Charting Techniques" he describes hanging man patterns with the following characteristics:

Typical characteristics

• Small candle body with longer lower shadow, resembling a hammer, with minimal (to zero) upper shadow
• Lower shadow more than twice the length of the body
• Occurrence after bullish price movement

Examples of use as a trading indicator

• If the pattern occurs after an extensive market rally, it indicates a potential reversal: Bearish (hanging man), should have confirmation
• If the pattern occurs after a market decline, it is known as a hammer pattern, a bullish indicator.

More for beginners

Check out our quick start guide to candlestick charting for more information if you are new to candlestick charting!