Hanging man and shooting star serve as a visual representation of price action, enabling traders to quickly understand market psychology. Among the dozens of candlestick patterns utilized by traders, the Hanging Man and the Shooting Star are two of the most common and commonly used bearish reversal indications.
If you’re beginning to read charts or seeking to improve your trading techniques, knowing how to recognize and apply these patterns can offer you a significant advantage. In this post, we’ll go over the concept, creation, psychology, and application of the Hanging Man and Shooting Star patterns so you can start detecting and applying them effectively in your trades.
In brief, what are candlestick patterns?
Candlestick charts are visual tools used in technical analysis to forecast market patterns and price movements using past price data. Each “candle” symbolizes a certain time frame (such as 1 minute, 1 hour, or 1 day) and shows
- Open price.
- Closing price
- High
- Low
Traders can predict market reversals or continuations based on the form and position of these candles. Among the numerous patterns, two single-candle bearish reversal signs stand out : the Hanging Man and the Shooting Star.
What is Hapatternan’s pattern ?
The Hanging Man is a single candlestick pattern that comes at the top of an uptrend and indicates a possible downward reversal. It resembles a person hanging from a rope, which explains the dramatic name.
Hanging Man Characteristics: It appears to follow an uptrend.
- Has a small actual body around the top of the candle.
- Has a long lower shadow (at least 2–3 times the size of the body).
- The object has little or no upper shadow.
Psychology Behind the Pattern
Buyers dominated the session, driving prices higher. However, at some time, sellers stepped in and dragged the price significantly down, only for purchasers to pull it back up just before the close. Such behavior demonstrates a weakness in the bullish momentum and warns that bears may be poised to take over.
However, because the closure is still at the top of the candle, confirmation is essential —traders typically wait for a bearish candle after the Hanging Man before moving.
What is the shooting star pattern?
The shooting star is another single candlestick pattern that comes at the top of an uptrend, but it resembles a star falling from the sky, indicating that a reversal is imminent.
Shooting stars are characterized by their appearance following an uptrend.
- There is a small actual body near the bottom of the candle.
- The object has a long upper shadow, which is at least 2-3 times the size of the body.
- Has little or no lower shadow.
Psychology Behind the Pattern
At first, the bulls push the price much higher, generating enthusiasm and momentum. However, sellers enter forcefully, lowering the price back to approximately the opening level. This quick rejection of rising prices indicates that bulls are losing strength while bears may be gaining influence.
The Shooting Star, like the Hanging Man, demands confirmation—ideally, a red (bearish) candle the next day.
Similarities between Hanging Man and Shooting Star.
While they appear different in appearance, both patterns have a few crucial features:
| Feature | Hanging Man | Shooting Star |
| Trend Context | Appears at top of uptrend | Appears at top of uptrend |
| Type | Bearish Reversal | Bearish Reversal |
| Body Location | Top of Candle | Bottom of Candle |
| Shadow/Wick Type | Long Lower Shadow/Wick | Long Upper Shadow/wick |
| Confirmation Needed ? | Yes | Yes |
Both patterns essentially indicate a decline in purchasing pressure and the possibility of a reversal.
How to Exchange Patterns of Hanging Men and Shooting Stars
It’s only half the fight to recognize these tendencies. The real magic occurs when you know how to exchange them wisely. Here’s how:
Verify the upward trend
Since these are reversal patterns, an uptrend must precede them. They become meaningless if you see them in a sideways or downward trend.
Identify the Trend
To identify a legitimate Hanging Man or Shooting Star, apply the candlestick formation criteria that we covered.
Await Verification
This step is critical. The following candle must close lower, preferably with significant bearish momentum (such as a long red candle).
Get into the Trade
When the confirming candle closes or there is a small retracement, you can begin a short position.
Entry: Below the low of the confirmation candle
Stop-Loss: Over the pattern candle’s high
Goal: Make use of Fibonacci levels, moving averages, or prior support zones.
Pro Tip: Make Use of Other Indicators
- To improve accuracy, combine these patterns with volume analysis, RSI, or MACD. For instance:
- If a shooting star forms while the RSI is overbought, the signal will be stronger.
- In the event that the pattern’s volume spikes Greater belief in reversal
Common Errors to Steer Clear of
Despite the reliability of these patterns, many traders make mistakes. Steer clear of these:
- Trading Without Verification False signals may result from acting on the pattern right away in the absence of a bearish candle that confirms it.
- Ignoring the Context of the Trend It can be unsuccessful to use these patterns in markets that are sideways or downtrending.
- Using Isolation Patterns For stronger indications, always combine with trend lines, support/resistance, or other indicators.
- Disregarding Risk Management You should not skip the stop-loss. Every pattern has the potential to fail, and risk management is essential.
Actual Chart Illustrations
Let’s illustrate how these patterns manifest in actual trading to make it more relatable.
Example 1: A stock chart with a hanging man
You observe a stock’s consistent 10-day upward trend. A hanging man with a lengthy lower shadow appears out of nowhere. A large red candle emerges the following day, reinforcing the pattern. Here, a short trade with the right stop-loss would have been ideal.
Example 2: A Crypto Chart with a Shooting Star
After a few days of rising prices, Bitcoin prints a Shooting Star at a resistance level. The volume is loud. The gap that opens the following day is your opportunity to make a profit or a loss.
When to Avoid Applying These Patterns
Additionally, in certain circumstances, these patterns could not be very helpful: In markets that are heavily reliant on news, When the pattern manifests during times of low volume If a previous rise isn’t evident
Never ignore the wider picture; price action is never isolated.
Hanging Man & Shooting Star Conclusion
The hanging man and shooting star candlestick patterns are straightforward yet potent indicators that can indicate a potential reversal in an upward trend.
Although their structures may differ, both patterns function as early indicators that bullish momentum is waning, allowing traders to prepare for a potential trend shift.
Nevertheless, no single pattern is perfect in isolation. It is crucial to verify these signals with price action, volume, or technical indicators, and to never overlook the significance of risk management.
By integrating candlestick patterns with a more comprehensive trading strategy, you will be better equipped to make informed and confident market decisions.
Maintain your patience, continue to practice, and allow the charts to speak for themselves.
