Hanging Man

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DEFINITION of 'Hanging Man'

A bearish candlestick pattern that forms at the end of an uptrend. It is created when there is a significant sell-off near the market open, but buyers are able to push this stock back up so that it closes at or near the opening price. Generally the large sell-off is seen as an early indication that the bulls (buyers) are losing control and demand for the asset is waning.

Hanging Man

BREAKING DOWN 'Hanging Man'

This formation does not mean that the bulls have definitively lost control, but it may be an early sign that the momentum is decreasing and the direction of the asset may be getting ready to change. The reliability of this signal is drastically improved when the price of the asset decreases the day after the signal. Hanging man formations can be more easily identified in intraday charts than daily charts and are a very popular formation used by day traders.

If this pattern is found at the end of a downtrend, it is known as a "hammer".

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RELATED FAQS
  1. What are the best technical indicators that complement the STARC Bands?

    Some of the best technical indicators to complement use of the STARC bands are other oscillators or momentum indicators and ... Read Full Answer >>
  2. How do I build a profitable strategy when spotting a Hanging Man pattern?

    Traders use the identification of a hanging man pattern as an indicator of a possible market reversal at the end of an uptrend. The ... Read Full Answer >>
  3. What is the difference between a Hanging Man and a Hammer Pattern?

    The hanging man and the hammer are both candlestick patterns that indicate trend reversal. The only difference between the ... Read Full Answer >>
  4. How are Hanging Man patterns interpreted by analysts and traders?

    The hanging man pattern is interpreted by analysts and traders as a signal of a possible market reversal, indicating that ... Read Full Answer >>
  5. What is the difference between Hanging Man & a Shooting Star Pattern?

    The hanging man and shooting star are both patterns that appear in Japanese candlestick charting. The hanging man appears ... Read Full Answer >>
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    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>

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