Hanging man candlestick chart pattern is formed after an extended up move when the opening and closing price are at or near high of the day and has a long lower shadow. There should be no or very small upper shadow. The colour of the body doesn't matter it can be either green or red, but if red its considered more bearish.The Hanging man candlestick chart pattern is of significance only if its formed after an up move . This chart pattern points towards possibility of bearish reversal happening in the market.
The lower shadow shows the buying that has come after making low for the day. As this is happening after a substantial up move the market has shaken itself and this is not good for the existing up move and makes this bearish reversal sign. Its very important to wait for the next day’s market closing for trade confirmation. Next day closing should be below hanging man’s body and in the lower part of hanging man candle range. The moment hanging man high is violated then formation is nullified.
Eventhough hammer and hanging man look similar they are differentiated depending upon when they are formed i.e whether after an up move or down move