Hanging Man
Also written Hanging man candle · Hanging man pattern
A bearish reversal candle that appears after an up move — a small real body with a long lower shadow at least twice that body — and it is only a warning until the next candle closes lower.
In plain language
A stock has been moving up for a few days. Then one session sells off hard in the middle of the day, before buyers drag it back to close near where it opened.
The candle that records this has a small body and a long tail hanging below it. That is the hanging man.
The long tail matters because it shows that sellers were able to take control for part of the session. On the way up, that is not supposed to happen. So the candle is read as a first sign that the up move may be tiring.
But only a sign. The workbook is firm that one candle proves nothing here.
How it works
Chapter 15.5.1 gives the hanging man 4 conditions and 1 confirmation rule.
Where it occurs. After an up move. The up move "can be small or large but should include at least a few price bars moving higher overall."
The shape. A small real body. A long lower shadow that is at least 2 times the size of the real body. Little or no upper shadow.
The close. It can be above or below the open. It only needs to be near the open, so that the real body stays small. Colour is not part of the definition.
What it means. The long lower shadow shows sellers took control for part of the trading period.
The confirmation rule. The workbook treats the hanging man as an early warning signal only. The next candle must close lower for it to be a valid reversal pattern. Traders usually exit long trades or enter short trades during or after that confirmation candle — "not before."
A worked example
Illustrative. A stock has risen from Rs 780 to Rs 848 over 6 sessions. The next day it opens at Rs 846, slides to Rs 812, then recovers to close at Rs 850.
| Measure | Value |
|---|---|
| Real body (Rs 846 open to Rs 850 close) | Rs 4 |
| Lower shadow (Rs 846 body low to Rs 812 low) | Rs 34 |
| Shadow as a multiple of the body | 8.5 times |
| Upper shadow | nil |
The 2-times minimum is cleared many times over, the body is tiny, there is no upper shadow, and it follows 6 higher bars. It is a textbook hanging man — and note the candle closed above its open, which does not disqualify it.
Now the confirmation. If the following session closes at Rs 836, below the hanging man's Rs 850 close, the reversal is valid and a trader acts then. If it instead closes at Rs 858, there is no valid reversal and a trader who shorted on the hanging man day acted early, against the workbook's own instruction.
Why NISM asks about it
Chapter 15.5.1 (Hanging Man) opens the workbook's section on chart reversal patterns, and the chapter's own Sample Question 2 is built on it: The candlestick pattern in a Hanging Man is unlikely to have which of the following features? The answer it wants is "a bullish reversal candlestick pattern that occurs after a down move" — because that describes a hammer, not a hanging man.
So the examinable core is the pairing. Same shape, opposite location, opposite signal.
Common exam traps
- Hanging man comes after an up move and is bearish. A hammer comes after a decline and is bullish. The shape is identical. Only the preceding trend tells them apart, and this is exactly what Sample Question 2 tests.
- The lower shadow must be at least twice the real body, and the upper shadow should be little or none.
- The close may be above or below the open. It only has to be near the open. Candidates who insist a hanging man must be red get this wrong.
- It is a warning, not a signal. Without a next candle that closes lower, there is no valid reversal pattern — and the workbook says trades are taken during or after the confirmation candle, not before.
- Do not confuse it with Dark Cloud Cover, which is also bearish but needs 2 candles and a gap up.
Check yourself
1.The candlestick pattern known as the Hanging Man is unlikely to have which of the following features?
- a)A small real body with a long lower shadow at least twice the size of the real body
- b)A long lower shadow indicating that sellers were in control for part of the trading period
- c)It is a bearish reversal candlestick pattern that occurs after an up move
- d)It is a bullish reversal candlestick pattern that occurs after a down move
Show the answer
Answer: (d) It is a bullish reversal candlestick pattern that occurs after a down move
The hanging man is bearish and occurs after an up move. Option D describes the hammer — identical geometry, opposite context, opposite meaning.
The first three options are all straight from the workbook. The shape is a small real body with a lower shadow at least twice the size of the real body and little or no upper shadow; the long lower shadow shows that sellers were able to take control for part of the trading period; and it forms after an up move that "should include at least a few price bars moving higher overall".
Remember that the hanging man is only an early warning — the next candle must close lower for the reversal to be valid.
2.A candle after a four-day decline opens at ₹248.00, makes a high of ₹248.50 and a low of ₹236.00, and closes at ₹246.00. Which conclusion is correct?
- a)It is a hanging man, because the lower shadow is far longer than the body
- b)It is a hammer, and the trade should be taken only after the next candle confirms by moving up
- c)It fails the test, because the lower shadow is not at least twice the full range of the candle
- d)It is a bullish engulfing pattern, because the body sits above the low
Show the answer
Answer: (b) It is a hammer, and the trade should be taken only after the next candle confirms by moving up
Do the geometry first. Real body = |248.00 − 246.00| = ₹2.00. Lower shadow = 246.00 − 236.00 = ₹10.00, which is five times the body and comfortably clears the "at least twice the real body" test. Upper shadow is a negligible ₹0.50.
Then the context. It follows a price decline, so it is a hammer, not a hanging man — option A gets the shape right and the context wrong.
Option C misstates the test: the shadow is compared with the real body, not with the full range of the candle. Option D describes a different pattern entirely — engulfing is a two-candle pattern requiring one real body to swallow another.
The second half of option B is as important as the first: the workbook says the price must start moving up following the hammer — this is called confirmation — and trades are typically taken after the confirmation candle, not before.
Where this is taught
Free preparation for NISM Series XVRelated terms
- Dark Cloud CoverA bearish two-candle reversal near the top of a congestion area: a bullish candle, then a gap-up candle that turns bearish and closes below the midpoint of the first.
- Engulfing patternA two-candle reversal pattern in which the second candle's real body completely swallows the first candle's body — green over red is bullish, red over green is bearish.
- HammerA bullish reversal candle that appears after a price decline — a small real body with a lower tail at least twice that body — valid only once the next candle confirms by moving the price up.
- Piercing PatternA bullish two-candlestick reversal pattern near the bottom of a trading range — a red candle followed by a green candle whose body covers at least half the red candle's body.
- Primary trendThe dominant, long-term direction of a market or stock — bull, bear or sideways — typically lasting a year or more, driven by macro-economic forces and investor sentiment.