Ever stared at your trading screen and wondered why that weird candle showed up right when the stock was flying high?
You’re looking at what might be a hanging man candlestick pattern.
And honestly, it freaked me out the first time I saw it too.
The name sounds scary, but this little candle can actually save your money if you know what to do with it.
Let me break it down for you like I’m explaining it to my younger brother.
What Is a Hanging Man Pattern?
Picture this.
You’re at a party and everyone’s having a great time.
Music’s loud, drinks are flowing, everyone’s dancing.
Then suddenly, one guy just sits in the corner looking tired.
That’s basically what a hanging man pattern does in trading.
The hanging man candlestick pattern shows up when prices have been going up for a while.
But then this one candle appears with a tiny body and a super long bottom shadow.
It’s like the market saying, “Hey, maybe we should slow down here.”
The pattern looks exactly like a hammer, but here’s the catch.
A hammer shows up after prices fall (bullish).
A hanging man shows up after prices rise (bearish).
Same shape, different story.
How Does the Hanging Man Pattern Look?
Let me paint you a picture of what you’re hunting for:
The Body
- Small real body at the top
- Can be red or green (doesn’t matter much)
- Usually less than 25% of the total candle length
The Shadows
- Super long lower shadow (at least 2x the body size)
- Little to no upper shadow
- The lower shadow should be the star of the show
The Setup
- Must appear after an uptrend
- Works best when the uptrend has been strong
- More reliable when volume is high
Think of it like a person hanging from a rope.
The small body is the head.
The long lower shadow is the body dangling down.
That’s why they call it the hanging man.
Why Does This Pattern Work?
Here’s what’s actually happening behind the scenes.
During the trading session, sellers pushed prices way down.
But buyers fought back and pushed prices up again.
The candle closed near where it opened.
Sounds bullish, right?
Wrong.
The fact that sellers could push prices so low shows they’re getting stronger.
It’s like watching a boxing match.
The champion (bulls) is still standing.
But the challenger (bears) just landed a solid punch.
The crowd starts to wonder if the champion is getting tired.
That’s the psychology behind the hanging man candlestick pattern.
My Personal Trading Strategy for Hanging Man Patterns
I’ve been trading for over 8 years now.
Lost money, made money, learned lessons.
Here’s exactly how I trade hanging man patterns today:
Step 1: Spot the Pattern
I wait for a clear uptrend first.
At least 3-4 green candles in a row.
The stronger the trend, the better.
Then I look for that hanging man shape.
Long lower shadow, small body, minimal upper shadow.
Step 2: Wait for Confirmation
This is where most traders mess up.
They see the hanging man and immediately go short.
Big mistake.
I wait for the next candle to confirm the reversal.
If the next candle closes below the hanging man’s low, I’m in.
If it doesn’t, I walk away.
Step 3: Set My Entry and Exit
Entry: Right below the hanging man’s low
Stop Loss: Above the hanging man’s high
Target: Usually 1.5 to 2 times my risk
Sometimes I take profits at key support levels below.
Step 4: Manage the Trade
I never risk more than 2% of my account on any single trade.
If the trade goes my way, I move my stop loss to breakeven after hitting 1:1 risk-reward.
Then I let the rest run to my target.
Real Examples from My Trading Journal
Let me share two trades that stick with me.
The HDFC Bank Trade (2023)
HDFC Bank was on a roll.
Up 12% in two weeks.
Everyone was talking about how banking stocks were the next big thing.
Then boom.
A perfect hanging man appeared at ₹1,680.
Tiny green body, massive lower shadow.
Next day opened lower and kept falling.
I entered short at ₹1,660.
Stopped out at ₹1,700.
Target at ₹1,580.
Hit my target in 3 days.
Made ₹80 per share.
The Reliance Mistake (2022)
Reliance was flying high.
Up 20% in a month.
Hanging man appeared at ₹2,800.
I got excited and entered immediately without waiting for confirmation.
Next day, Reliance gapped up and never looked back.
Lost ₹40 per share because I didn’t follow my own rules.
Lesson learned: Always wait for confirmation.
Common Mistakes to Avoid
Trading Without Confirmation
This is the biggest mistake I see new traders make.
They see the hanging man and think they’re smart.
They go short immediately.
Then get crushed when the uptrend continues.
Always wait for the next candle to confirm.
Ignoring the Volume
Volume tells you if the pattern is real or fake.
High volume on the hanging man day = more reliable signal.
Low volume = probably just noise.
I learned this the hard way after getting faked out multiple times.
Wrong Risk Management
Some traders risk 5-10% of their account on these setups.
That’s insane.
Even the best patterns fail 40-50% of the time.
Stick to 1-2% risk per trade maximum.
Trading Every Hanging Man
Not every hanging man is worth trading.
I skip them if:
- The uptrend is weak
- Volume is low
- Market conditions are choppy
- It appears near major support levels
Quality over quantity always wins.
Advanced Tips for Better Results
Combine with Other Indicators
I don’t trade hanging man patterns in isolation.
I look for:
- Overbought RSI levels (above 70)
- Price hitting resistance zones
- Bearish divergence on momentum indicators
- High market sentiment readings
Consider the Timeframe
Hanging man patterns work on all timeframes.
But I prefer daily and 4-hour charts.
They give cleaner signals with less noise.
1-minute charts are too messy.
Weekly charts take forever to play out.
Watch the Market Context
Even perfect hanging man patterns can fail in strong bull markets.
I pay attention to:
- Overall market sentiment
- Sector rotation patterns
- News flow and events
- Institutional buying/selling
When NOT to Trade Hanging Man Patterns
During Earnings Season
Earnings can make any technical pattern useless.
I avoid trading hanging man setups 2-3 days before major earnings announcements.
In Trending Markets
When the market is in a strong uptrend, hanging man patterns often fail.
The trend is your friend until it ends.
Don’t fight it too early.
Low Volume Days
If volume is below average, I skip the trade.
Low volume signals lack conviction.
The pattern might not hold.
Near Major Support
If the hanging man appears near strong support levels, be careful.
Support can act like a trampoline and bounce prices back up.
Psychology Behind the Pattern
Understanding market psychology makes you a better trader.
Here’s what happens during a hanging man formation:
Opening: Bulls are confident, prices open higher
Mid-Session: Bears attack, push prices way down
Recovery: Bulls fight back, recover most losses
Close: Price closes near opening level
The Message: Bulls are getting tired, bears are getting stronger
This tug-of-war creates doubt in traders’ minds.
Some bulls start taking profits.
New buyers become hesitant.
That’s when the reversal begins.
Hanging Man vs Other Patterns
Hanging Man vs Hammer
Same shape, different context.
Hammer: Appears after downtrend (bullish) Hanging Man: Appears after uptrend (bearish)
Location matters more than looks.
Hanging Man vs Doji
Doji: Open and close at same price, shows indecision Hanging Man: Small body with long lower shadow, shows battle between bulls and bears
Both signal potential reversals, but hanging man is more aggressive.
Hanging Man vs Shooting Star
Shooting Star: Long upper shadow, small body, appears after uptrend Hanging Man: Long lower shadow, small body, appears after uptrend
Both are bearish reversal signals.
Shooting star shows rejection of higher prices.
Hanging man shows bears testing lower prices.
Backtesting Results
I spent weeks backtesting hanging man patterns on Nifty 50 stocks.
Here’s what I found:
Success Rate: 58% of confirmed hanging man patterns led to at least 5% decline within 10 days
Best Performers: IT and pharmaceutical stocks
Worst Performers: Banking and auto stocks (too volatile)
Optimal Risk-Reward: 1:2 ratio gave best results
Time to Target: Average 6-8 trading days
These numbers aren’t gospel.
But they give you a baseline to work with.
Tools and Resources
Charting Platforms
I use TradingView for pattern recognition.
Zerodha Kite works well too.
Both have good candlestick pattern scanners.
Screening Tools
Chartink: Great for scanning Indian stocks Screener.in: Good fundamental data NSE website: Free real-time data
Educational Resources
Books: “Japanese Candlestick Charting Techniques” by Steve Nison YouTube: Rayner Teo has excellent candlestick videos Websites: Investopedia for basic concepts
Risk Management Rules
Position Sizing
Never risk more than 2% of your account on any hanging man trade.
If your account is ₹1,00,000, maximum loss per trade is ₹2,000.
Do the math before entering the trade.
Stop Loss Placement
Always place stop loss above the hanging man’s high.
Add a small buffer for volatility.
If hanging man high is ₹100, set stop at ₹102-103.
Profit Taking
I take partial profits at 1:1 risk-reward.
Let the rest run to 1:2 or major support levels.
Trail your stop loss as the trade moves in your favor.
Market Conditions That Favor Hanging Man Patterns
High Volatility
Hanging man patterns work better in volatile markets.
Low volatility markets don’t give clear signals.
Strong Preceding Trend
The stronger the uptrend before the hanging man, the more reliable the reversal signal.
Weak trends produce weak reversal signals.
High Market Participation
Bull markets with high participation create better hanging man setups.
Everyone’s buying, then suddenly doubt creeps in.
That’s when hanging man patterns shine.
Technology and Trading Apps
Mobile Trading
Most brokers now offer mobile apps with candlestick charts.
Zerodha Kite, Upstox, and Angel One all support pattern recognition.
You can spot and trade hanging man patterns from your phone.
Automated Alerts
Set up alerts for hanging man patterns on your watchlist.
TradingView allows custom alerts based on candlestick patterns.
This saves you from staring at charts all day.
Paper Trading
Before risking real money, practice with paper trading.
Most platforms offer virtual trading accounts.
Perfect your hanging man strategy without financial stress.
Frequently Asked Questions
Q: How reliable is the hanging man pattern?
The hanging man pattern works about 55-60% of the time when confirmed properly.
Not perfect, but decent odds if you manage risk well.
Remember, no pattern works 100% of the time.
Q: Should I trade hanging man patterns in all market conditions?
No way.
Skip them during:
- Strong trending markets
- Low volume periods
- Major news events
- Earnings season
Quality setups only.
Q: What’s the difference between a hanging man and a hammer?
Location, location, location.
Hammer = Bottom of downtrend (bullish) Hanging man = Top of uptrend (bearish)
Same shape, different context, opposite meaning.
Q: Can I use hanging man patterns for intraday trading?
Yes, but be extra careful.
Intraday charts are noisier.
Use higher timeframes for confirmation.
And keep your risk even smaller.
Q: What happens if I ignore the confirmation candle?
You’ll get burned more often.
I’ve done it, lost money, learned my lesson.
Confirmation reduces false signals significantly.
Patience pays in trading.
Q: How do I screen for hanging man patterns?
Use technical scanners like:
- TradingView’s pattern recognition alerts
- Chartink’s custom screeners
- NSE’s technical analysis tools
Set up alerts and let technology do the hunting.
Q: What’s the best timeframe for hanging man patterns?
Daily charts work best for swing trading.
4-hour charts for shorter-term trades.
Avoid anything below 1-hour for reliability.
Q: Should I always go short on hanging man patterns?
Not necessarily.
Sometimes I just exit my long positions instead of going short.
Depends on market conditions and my overall portfolio.
Q: How do I handle gap openings after hanging man patterns?
If the gap is in your favor (down), take the trade.
If the gap is against you (up), skip the trade.
Don’t chase trades that have already moved against you.
Q: Can hanging man patterns fail?
Absolutely.
Even perfect-looking patterns fail 40-45% of the time.
That’s why risk management is more important than pattern recognition.
Protect your capital first, profits second.
Final Thoughts
The hanging man candlestick pattern isn’t a magic bullet.
It’s just one tool in your trading toolbox.
Use it wisely, combine it with other analysis, and always manage your risk.
I’ve made money with it.
I’ve lost money with it.
But over time, with proper risk management and confirmation, it’s been profitable for me.
Remember, trading is a marathon, not a sprint.
Focus on consistency over home runs.
And never risk money you can’t afford to lose.
The hanging man candlestick pattern can be your friend if you treat it with respect and follow the rules.
Happy trading!
📊 Popular Candlestick Patterns
| Pattern Name | Type |
|---|---|
| Bearish Kicker | Bearish Reversal |
| Hanging Man | Bearish Reversal |
| Three Inside Down | Bearish Reversal |
| Gravestone Doji | Bearish Reversal |
| Piercing Line | Bullish Reversal |
| Bullish Kicker | Bullish Reversal |
| Bearish Engulfing | Bearish Reversal |
| Long-Legged Doji | Neutral/Reversal |
| Tweezer Bottom | Bullish Reversal |
| Dark Cloud Cover | Bearish Reversal |
| Doji | Neutral/Reversal |
| Bullish Harami | Bullish Reversal |
| Bearish Spinning Top | Bearish Reversal |
| Dragonfly Doji | Bullish Reversal |
| Three Outside Up | Bullish Reversal |
| Bullish Engulfing | Bullish Reversal |
