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Key Takeaways
- A hanging man has a small real body near the top of the period range, a long lower shadow, and little or no upper shadow.
- The same geometry is called a hammer when it forms after a decline and a hanging man when it forms after an advance, so the prior trend is what names the candle.
- The worked candle trades to $100.20 and closes at $102.40 near the top of its $2.70 range.
- Its next session closes at $99.60 below the $100.20 low, completing the example’s bearish confirmation rule.
- Trade it at resistance after a real advance, on a confirmed close below the low, with the stop above the high.
What is a hanging man candlestick?
A hanging man candlestick is a single candle with a small real body near the top of its range, a long lower shadow and little or no upper shadow that forms after an advance. It is traditionally read as a bearish reversal setup, and its high and low become the reference levels for a short entry or an exit.
The preceding advance distinguishes it from the same-shaped Hammer, which forms after a decline.
How to identify a hanging man: body and shadow rules
Body = |close − open|. Lower shadow = min(open, close) − low. Upper shadow = high − max(open, close).
This example requires a positive body, lower shadow at least twice the body, upper shadow at most 15% of the full range, and the entire body in the top third. For the placement test, divide high − min(open, close) by high − low and require a result at or below one-third.
A candle with no body is a doji, so it never gets a shadow/body ratio.
Formula
For body B > 0 and range R > 0, this example requires lower shadow ≥ 2B, upper shadow ≤ 15% of R and the entire body within the top third of R, after an advance.- Real body = absolute value of close minus open.
- Lower shadow = the lesser of open and close, minus the period low.
- Upper shadow = the period high, minus the greater of open and close.
- Top-third placement means (high − min(open, close)) / R ≤ 1/3. A candle with no body is a doji and gets no lower shadow / B ratio.
Hanging man candlestick example
XYZ advances across three sessions from a $98 open to a $102.20 close. The hanging-man session has O $102.60, H $102.90, L $100.20 and C $102.40. The example’s bearish setup requires the next session to close below $100.20.
- Real body: |$102.40 − $102.60| = $0.20
- Lower shadow: $102.40 − $100.20 = $2.20
- Lower-shadow ratio: $2.20 / $0.20 = 11.0, above the common 2.0 screen
- Upper shadow: $102.90 − $102.60 = $0.30, small relative to the range
- Confirmation session: close of $99.60 is below the hanging man low of $100.20
The $2.20 lower shadow is 11 times the $0.20 body. The $0.30 upper shadow is 11.1% of the $2.70 range, and the whole body sits in its top third. The next $99.60 close meets the below-$100.20 confirmation rule, which arms a short with the stop above the $102.90 high.
The first three sessions close at $99.00, $100.60 and $102.20. The next candle opens at $102.60, reaches $102.90, trades to $100.20 and closes at $102.40.
Its real body is $0.20 and its lower shadow is $2.20, an 11-to-one ratio. The $0.30 upper shadow occupies 11.1% of its $2.70 range. The body’s lower edge sits $0.50 below the high, within the top third.
The example requires the following session to close below $100.20. Its $99.60 close completes that confirmation condition.
Hanging man body colour vs the preceding trend
The worked candle has a downward body because its close is below its open. A hanging man can also have an upward body while meeting the same shape conditions.
Use the preceding price sequence to establish the advance, with one trend rule you apply every time, such as rising closes or higher swing highs.
How to trade a hanging man
Compare the pattern’s location with Support and Resistance. Specify the confirmation event, subsequent entry and stop reference. Measure position size from the selected entry-to-stop distance.
For an existing long, the same levels set the exit: a close below $100.20 is the signal to sell or hedge, and the hedge’s premium and expiration decide what that protection costs.
Look for puts bought at the ask near the high in Options Flow, then read in the Options Profit Calculator what the hedge costs and what a put or put spread pays below $100.20.
Limitations of the hanging man pattern
- Require a prior advance and a close below the low. Without the advance the shape carries no bearish reversal meaning, and the confirming close gives up part of the move to show sellers following through.
- Fix the chart interval and session before scanning. The same price move can form a hanging man on a daily chart and none on an hourly chart, and extended-hours prices can change the candle.
- Fix your shape thresholds before you scan. Sources and platforms set different cutoffs, so the same candle can pass on one screen and fail on another.
- Keep the stop above the candle’s high. Inside a strong uptrend a hanging man can be followed by new highs, and that stop defines the planned loss.
Bottom line
A hanging man marks a session where price traded well below the open during an advance and then recovered near the high. Trade it short once a close below its low confirms the turn, favor signals at resistance, and size the trade from the stop above its high.
Clear answers
Frequently Asked Questions
Sources and Further Reading
- Fidelity: Identifying Chart Patterns (session slides)
- Fidelity: Identifying Chart Patterns (session transcript)
- Thomas Bulkowski, The Eight Best-Performing Candles (Stocks & Commodities, hosted by Fidelity)
How entries are sourced, calculated and updated: editorial methodology.