The hanging man is a candlestick shape used by technical analysts in charting. As with most candlestick interpretations, the name is derived from the shape of the candlestick.
The behaviour portrayed in this scenario is one of a bearish turnaround in an uptrend that is temporary. A hanging man candle has three main features.
Firstly the difference between open and closing prices are small meaning it has a small real body.
Secondly, it has a long lower wick, indicating that there was selling pressure during the period.
Finally, it has a very small upper wick, indicating that the bulls failed to make any sort of convincing move higher. What this means is that there’s been a change in market sentiment, prices are likely to fall, thus selling is about to commence.
The hanging man pattern is perceived as a warning that the asset is more than likely enter a downtrend although it pays to remember that hanging man shapes only signal short term selloffs and these can happen within an established uptrend that never breaks.