The hanging man candle is a reversal candlestick chart pattern. It mainly forms on top of the market and indicates the market has reached its top or correction level. This is a bearish reversal chart pattern. It shows how the bullish momentum has to lose its grip on it.
Hanging men mostly formed an uptrend on the top of the market. After the formation of that chart pattern, there is the possibility to market can drop down from that level.
Many traders use this chart pattern to enter the sell-side position. Because there is a bit of confirmation from that level the market can fall and the seller can take the profit.
We know as well as the hanging man is a very popular candlestick chart pattern in the entry candlestick. It has more accurate confirmation in the market. After the formation of this, there is a huge possibility from there seller take the overall control from buyers.
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How Hanging man formed in the Market
The point comes to how this chart pattern is formed in the market. This chart pattern has a small body, a small upper shadow, and a long lower shadow. In that chart pattern, the long lower shadow indicates the seller pulls the price to the downside during the day or significantly time. But the buyer has too much control and they succeed to give the close nearest opening price.
The traders use that chart pattern to take a sell-side trade. The seller has made a position below that candlestick chart pattern. And the stop loss order punch above the Hanging man candle with a little bit of buffering.
You must keep one thing in mind while doing trade on that chart pattern in the market. The hanging man is not a reliable indicator every time. Maybe it is not successful every time. You must have a strategy for that chart pattern.
The hanging man chart pattern belongs to the hammer family. All hammer families have worked for reversal in the market. When any chart pattern is formed on top or bottom then you can take trade very easily.
How to take entry on that chart pattern
Now the point has come to how to take entry on that chart pattern. While taking the trade you should consider hanging man has a long down shadow at least two times from its real body.
This candle must be performed on the top of the market. And the market is in an uptrend, and after the uptrend that chart pattern has served on the top, and its looks like a doji chart pattern.
This is a three-candlestick combination chart pattern. One is a bullish candle, the second is a hanging man, and the last one is a bearish candle.
Now let’s understand how we can take entry on that chart pattern. First of all, you must see the market has reached the top with proper uptrend and after made a hanging mand chart pattern. Forming the hanging chart pattern you should wait for the next candle which gives close below the hanging man and engulfs it completely inside.
After the engulfing, you can take the trade on that chart pattern.
What is the stop loss?
Stop loss is important to know where to place it. If you are not aware of your stop loss then there is a huge chance to wipe out your capital.
Many forex traders have wiped out their accounts in the market. Because they don’t have a proper stop loss in the market.
You can place very little stop loss on that chart pattern. it is on hanging man high with a little bit of buffering. You must place the stop loss order on the system not in your mind. Because the market is uncertain and it can move very rapidly in our favorable direction.
So that’s why we must stop loss in our system. Never be afraid to take the stop loss, because stop loss teaches you a new lesson every time. If you stop-loss hunted by the market then you have the opportunity to learn something new from the market.
What is the Target on the hammer chart pattern?
This is every trader’s favourite. And who doesn’t want to become a successful and profitable trader in the market? Then you must book profits on time.
The market often allows every trader to book profit on the top some refuse to book and some take the profit on there.
According to my opinion, the trader should book their profit two times from that point from there the trader has taken the trade.
Mean the target is two times than our entry point to stop loss. A trader can make more money if he has followed the rule and regulations in the market.
