what does the hanging man candlestick tell you 
a hanging man represents a large sell off after the open which sends the price plunging but then buyers push the price back up to near the opening price traders view a hanging man as a sign that the bulls are beginning to lose control and that the asset may soon enter a downtrend the hanging man pattern occurs after the price has been moving higher for at least a few candlesticks this does not need to be a major advance it may be but the pattern can also occur within a short term rise amidst a larger downtrend the hanging man looks like a t although the appearance of the candle is only a warning and not necessarily a reason to act the hanging man pattern is not confirmed unless the price falls the next period or shortly after after the hanging man the price should not close above the high price of the hanging man candle as that signals another price advance potentially if the price falls following the hanging man that confirms the pattern and candlestick traders use it as a signal to exit long positions or enter short positions if entering a new short position after the hanging man has been confirmed a stop loss can be placed above the high of the hanging man candle the hanging man and candlesticks in general are not often used in isolation rather they are used in conjunction with other forms of analysis such as price or trend analysis or technical indicators hanging men occur on all time frames from one minute charts right up to weekly and monthly charts example of how to use a hanging man candlestickimage by sabrina jiang investopedia 2020tradingviewin the daily chart of amgen inc amgn a compelling example of a hanging man candlestick pattern was observed marking a significant moment in its trading behavior after a robust rally of 33 from its september 2022 low amgn reached a peak in november 2022 this uptrend was followed by a period of consolidation during which the hanging man pattern materialized signaling a potential shift in market sentiment traders adept in utilizing this pattern would typically initiate a position at the market s opening following the appearance of the hanging man setting a stop loss at the recent high to manage risk in the amgn scenario this strategy involved placing the stop loss at 296 67 to adhere to a risk reward ratio of 2 1 a limit order for exiting the position would be set for agn in this case this exit point was established at 263 07 with the trade commencing at an opening price of 285 55 notably this particular trade on angn proved successful within a span of 21 trading days it is crucial to understand that such examples serve as illustrations only traders commonly rely on extensive backtesting and scenario analyses across various securities before executing trades based on signals like these the hanging man pattern while indicative is not a standalone predictor and is best utilized in conjunction with comprehensive security and market analysis and risk management strategies the difference between the hanging man and hammer candlesticksthe hanging man and the hammer candlesticks look identical the only difference is the context the hammer is a bottoming pattern that forms after a price decline the hammer shape shows strong selling during the period but by the close the buyers have regained control this signals a possible bottom is near and the price could start heading higher if confirmed by upward movement on the following candle the hanging man occurs after a price advance and warns of potentially lower prices to come position in trend appears around the top of an uptrendimplication indicates potential bearish reversalconfirmation often requires bearish confirmation following the patternposition in trend found around the end of a downtrendimplication signals a bullish reversalconfirmation should be followed by bullish confirmationlimitations of using the hanging man candlestickone of the limitations of the hanging man and many candlestick patterns is that waiting for confirmation can result in a poor entry point the price can move so quickly within the two periods that the potential reward from the trade may no longer justify the risk the reward can also be hard to quantify at the start of the trade since candlestick patterns don t typically provide profit targets instead traders need to use other candlesticks patterns or trading strategies to exit any trade that is initiated via the hanging man pattern there is also no assurance the price will decline after a hanging man forms even if there is a confirmation candle this is why placing a stop loss to control risk above the high of the hanging man is recommend when a short trade is initiated 