This Japanese candlestick formation would possibly be the second most important setup. It is similar to the pin bar formation but does not offer as strong a signal as a possible change in trend. The hanging man is a top reversal pattern and as such is best played at swing highs. They typically have the following characteristics:
- The upper shadow will be small or non‐existent.
- The lower shadow should be twice the length of the real body.
- Best to wait for confirmation on the following candle.
The hanging man shows that price met with strong selling in the market but was pushed back up by buyers.
It does not carry as much strength as a pin bar and it is recommended that you wait for bearish confirmation on the following candle. Never jump the gun and get in early without confirmation first.
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