Hanging Man is a candlestick pattern that has a single candlestick. It is formed during an uptrend. This indicator reflects that the price is increasing continuously. Therefore you can expect that a reversal in the direction of the price movement is soon going to happen. It is just like a warning sign that indicates that buyers are not interested to trade right now. The forex market is dominated and ruled by seller as the number of buyers is equal to none.Obviously there is lack of momentum in market.
The structure of the Hanging man has the following characteristics.
- The length of the upper shadow is very small. Sometimes there is no upper shadow thus you should not be surprised to see the absence of upper shadow.
- The length t of the lower shadow is long. It is at least two times the size of the body. In some cases, its length is about three times the length of body.
- You need to be bothered by the colour of the body. It can be black or white. However in most cases the colour of the body is black as black colour is usually associated with bears.
- The body is always located at the higher end of the range.
- The body is always small in the Hanging Man Pattern.
The long length of the lower shadow shows that the price of the currency is currently controlled by sellers. The sellers have succeeded in keeping a low price during the entire trading session.Although sellers have taken control of the market yet the buyers managed to uplift the price to some extent but still it all happened near the opening point.
Hammer and Hanging Man:
Hanging Man resembles another single candlestick pattern named ‘Hammer’. Their shape resembles each other. However both of them have different meanings and indicate totally opposite market conditions.