Hanging Man Pattern
By: Lisa
The player will show in this paragraph
Hanging Man Japanese Candlestick Pattern
The Bearish Hanging Man Pattern is a single candlestick and a weak top reversal pattern. It is similar to the Bearish Dragonfly Doji Pattern, as they both have long lower wicks. However, the Bearish Hanging Man Pattern has a small real body at the upper end of the trading range instead of a flat line.
It is also very similar to the Hammer, except it is at the top of an uptrend. If you see the correct indication of the Hanging Man signal, your probability of being on the right side of a trade increases dramatically.
The Hanging Man is a single candle. It is identified because it looks like the Hammer at the top of an upward trend. It has a small body at the top of the trading range, with the lower shadow being at least two times greater than the body length.
Rules to identify the Hanging Man pattern:
- The lower shadow should be at least two times the length of the body..
- The real body is at the top end of the trading range. While a black body is slightly stronger, it is not required to signal the reversal.
- There should be little or no upper wick.
- Watch the next day to ensure the reversal is not a false signal.
Potential Signal Strengtheners:
- The longer the lower shadow, the higher probability of a reversal.
- A gap above the previous day’s close indicates a stronger reversal if the following day after the Hanging Man opens lower.
- Large volume trading on the Hammer day indicates that the reversal is occurring.
General Analysis and Investor Sentiment:
The market trend was on its way up. The price opens higher than the previous time period but starts to move lower. This indicates that the buyers have topped out of the market. The sellers move the price lower, but the buyers step in and the price moves back up to close in the higher end of the trading range. This creates a small body and a long tail. Even though the buyers have pushed the price back up, this indicates strong activity from the sellers which indicates that investor sentiment is changing. If the next day shows a lower open, or a black candle by close, reinforces that sellers are taking control and a reversal is very likely or has begun.
This is an especially good indicator if the market is overbought, at the top of an uptrend, and provides the information necessary for interpreting the reversal.
Thats it for the Hanging Man Japanese Candlestick Pattern. Keep learning and mastering Forex with us, here at PipsAngels.com. See you soon!
