Hanging Man
The Hanging Man is a candlestick patterns indicator used in Skyrexio Strategy Builder for pattern recognition and reversal/continuation signals.
Introduction
The Hanging Man is a bearish reversal candlestick pattern that signals potential SHORT opportunities or LONG position exits. This single-candle pattern features a small body at the upper end and a long lower shadow, but appears at the top of uptrends, indicating that sellers tested lower levels and buying pressure may be weakening.
How Hanging Man Works
Hanging Man is a single-candle bearish reversal pattern with specific characteristics:
• Small body - The real body is small relative to the entire candle • Long lower shadow - Lower shadow is at least twice the length of the body • Minimal upper shadow - Little to no upper shadow • Body position - Body appears at the upper end of the candle • Context matters - Most effective at resistance levels or after extended uptrends
Key Characteristics
Category
Candlestick Patterns
Type
Bearish Reversal Signal
Primary Use
SHORT entries, LONG exits
Timeframe
All timeframes supported (1m to 1M)
Confirmation
Volume, resistance levels, trend context
Strategy Applications
🔴 SHORT STRATEGY (Primary Use)
Hanging Man is primarily a SHORT signal - enter short positions when the pattern appears at resistance levels.
Base Entry Order (SHORT)
Base Order Condition: Hanging Man Pattern Detected
First Condition: Hanging Man
Timeframe: 1H
Additional Confirmation:
First Condition: Volume
Timeframe: 1H
Operator: Greater Than
Second Condition: Simple Moving Average (20)
Timeframe: 1HAdditional Entry Orders (SHORT)
Additional Entry 1: Pattern confirmation with momentum
First Condition: RSI
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 65
OR
Additional Entry 2: Breakdown below hanging man low
First Condition: Close Price
Timeframe: 1H
Operator: Less Than
Second Condition: Low Price
Timeframe: 1HTake Profit Orders (SHORT)
Rule 1: Exit condition - Target reached at support level
First Condition: Close Price
Timeframe: 1H
Operator: Less Than
Second Condition: Low Price
Timeframe: 1H
OR
Rule 2: Exit condition - Oversold momentum warning
First Condition: RSI
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 25
OR
Rule 3: Exit condition - Bullish reversal pattern detected
First Condition: Hammer
Timeframe: 1HStop Loss Orders (SHORT)
Rule 1: Stop loss - Pattern invalidated (price above hanging man high)
First Condition: Close Price
Timeframe: 1H
Operator: Greater Than
Second Condition: High Price
Timeframe: 1H
OR
Rule 2: Stop loss - Volume surge breaks bearish momentum
First Condition: Volume
Timeframe: 1H
Operator: Greater Than
Second Condition: Simple Moving Average (20)
Timeframe: 1H
OR
Rule 3: Stop loss - Bullish momentum confirmed
First Condition: MACD Line
Timeframe: 1H
Operator: Cross Above
Second Condition: MACD Signal Line
Timeframe: 1H🟢 LONG STRATEGY (Secondary Use)
Hanging Man can be used in LONG strategies as an exit signal or contra-trend bounce entry in extremely oversold conditions.
Counter-Trend Risk: Using Hanging Man for LONG entries is high-risk and should only be considered in extreme oversold conditions with very tight risk management.
Base Entry Order (LONG) - Contra-trend bounce
Base Order Condition: Hanging Man in oversold market
First Condition: RSI
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 20
AND
First Condition: Hanging Man
Timeframe: 1HAdditional Entry Orders (LONG) - Not recommended
Additional entries not recommended for LONG strategy using Hanging Man. Use other bullish indicators like:
Bullish divergence indicators
Take Profit Orders (LONG) - Exit existing positions
Rule 1: Exit condition - Hanging Man signals trend reversal
First Condition: Hanging Man
Timeframe: 1H
OR
Rule 2: Exit condition - Resistance level reached
First Condition: Close Price
Timeframe: 1H
Operator: Greater Than
Second Condition: High Price
Timeframe: 1H
OR
Rule 3: Exit condition - Overbought momentum exhaustion
First Condition: RSI
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 75Stop Loss Orders (LONG) - Protect existing positions
Rule 1: Stop loss - Hanging Man confirms downtrend
First Condition: Hanging Man
Timeframe: 1H
OR
Rule 2: Stop loss - Support breakdown confirmed
First Condition: Close Price
Timeframe: 1H
Operator: Less Than
Second Condition: Low Price
Timeframe: 1H
OR
Rule 3: Stop loss - Volume confirms breakdown
First Condition: Volume
Timeframe: 1H
Operator: Greater Than
Second Condition: Simple Moving Average (20)
Timeframe: 1HAdvanced Strategy Combinations
Multi-Timeframe Hanging Man (SHORT)
Resistance Level Rejection (SHORT)
Risk Management Guidelines
Position Sizing
SHORT Strategy
Standard
Pattern appears at resistance
LONG Strategy
Reduced (25-50%)
Counter-trend plays only
High Volume
Increase confidence
Can use larger size
Low Volume
Reduce size
Wait for confirmation
Pattern Reliability Factors
✅ Appears at established resistance levels ✅ High volume on hanging man candle ✅ Follows extended uptrend ✅ Long lower shadow (2x+ body size) ✅ Small body at upper end
Best Practices
For SHORT Strategies
Resistance context - Most effective at key resistance levels
Volume confirmation - Ensure higher volume on hanging man candle
Shadow length - Longer lower shadow indicates stronger selling interest
Follow-through - Confirm with next candle's bearish action
For LONG Strategies
Extreme oversold only - Only consider in deeply oversold conditions
Counter-trend risk - Use smaller position sizes
Quick profits - Take profits fast on any rally
Tight stops - Use very tight stop losses
Common Mistakes to Avoid
Wrong context - Trading hanging man in downtrends without resistance confirmation
No volume - Ignoring volume confirmation for the pattern
Body size - Accepting patterns with large bodies relative to shadows
Wrong direction - Don't go LONG on Hanging Man without extreme conditions
Market Conditions Analysis
Uptrend
🟢 High (reversal signal)
🔴 Very Low (against trend)
Downtrend
🟡 Medium (continuation)
🔴 Low (counter-trend)
Ranging
🟢 High (at resistance)
🟡 Medium (at support only)
High Volatility
🟢 High (clear signals)
🔴 Low (whipsaws)
Low Volume
🔴 Low (wait for confirmation)
🔴 Very Low (avoid)
Related Patterns
Conclusion
Key Takeaways
PRIMARY USE: SHORT entries at resistance levels
SECONDARY USE: LONG exits when holding positions
TERTIARY USE: Counter-trend LONG entries (high risk, oversold only)
ALWAYS: Confirm with Volume and resistance level context
Success with Hanging Man requires understanding its bearish nature and using it appropriately at resistance levels. The pattern's effectiveness increases significantly when combined with volume confirmation and proper market context.
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