Hanging man is a bearish reversal candlesticks pattern. It is the opposite of hammer. In order to provide valid signals an uptrend must be in place before the pattern occurs. Hanging man can be either color, green or red. Bellow follows its graphical representation.
The next day after the green candlestick opens with a gap up and then price is dropping, but during the session buyers are taking control again and finally price closes a little above (green hammer) or a little below (red hammer) its opening. The long tail is a sign that after a price advance sellers are appearing again.
Trade set up using hammer
In NVDA daily chart (below) price is visiting a strong resistance for the first time. This a high probability trade by itself, but the formation of a hanging man below resistance augments greatly the probabilities of success. Preferably, in order to magnify further the possibility of success we want the market to be in a midterm downtrend or forming at the same day a bearish candlesticks pattern after visiting for the first time a resistance level.
The stop should be placed above resistance like we do in the case of entering a reversal without confirmation, or above the high of the hanging man if we open the position based on the candlesticks pattern.