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Lesson 14

  1. The Hanging Man

The Hanging Man is a Bearish candlestick pattern that appears at the end of an uptrend. It usually appears when there is a significant sell-off near the market’s high. Buyers, on the other hand, have the ability to push the pair’s price back up to near the opening level. Mostly a sell-off, as evidenced by the Bulls’ loss of territory. It demonstrates a lack of strength.

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As I previously stated, the Hanging Man is Bearish when it appears after a significant uptrend. I understand what you’re thinking. Isn’t it true that these patterns can also appear after a downtrend? The simple response is Yes!

When this happens, however, it is referred to as a Hammer. Small red bodies (small spread between open and close prices) and long lower shadows distinguish it (the lowest is significantly lower as they open high and close).

The upper shadow of the Hanging Man is absent or nearly absent, while the lower shadow is at least twice as long as the Candle’s body. The selling pressure will be indicated by the lower half of the Candle’s shadow. When the formation is set at a Resistance level, it is a fantastic Price Action trade setup. The first step is to use your rectangle tool to draw the Hanging Man candlestick formation. Make sure you’re accurate to the highest degree possible. Draw from the top shadow to the bottom shadow, stretching the rectangle to the right slightly (so you give the price a little space to play).

As we move to the next time frame and apply the rules, this is your setup.

A weekly Hanging man is depicted in the example below.

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Once the Hanging Man candlestick has been emphasized, you can move on to the daily time frame. The Hanging Man was spotted on the weekly chart in this case. We’ve zoomed in on the daily chart to get a better look at the price action, as shown below. We can simply wait for an MA Crossover and an apparent candlestick interruption under the reach instead of entering a 50-50 sell trade right after the Hanging Man.

We simply waited for the momentum to shift, the Resistance to remain firm, and the Trend to reverse.

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