What signal is required for a trader to turn bearish after observing a hanging man pattern?

The correct answer indicates that a close below the real body of the hanging man pattern is required for a trader to turn bearish. The hanging man is a candlestick pattern that often signals a potential reversal from bullish to bearish. It forms after an uptrend and has a small real body located at the upper end of the trading range, with a long lower shadow.

For traders utilizing this pattern, a close below the real body of the hanging man serves as confirmation that selling pressure has emerged, indicating that buyers are losing control and that sellers are becoming more aggressive. This indicates the potential for further declines in price, thus validating a bearish outlook.

Other options presented do not align with the typical interpretation of the hanging man pattern. For instance, a close above the real body would suggest that the bullish momentum is still intact, negating the bearish implications of the hanging man. Similarly, a confirmation candle with high volume could strengthen a bearish sentiment if it followed a close below the real body, but it is the specific price action that demonstrates market sentiment first. A drop in trading volume generally indicates a lack of participation in the market and does not serve as a reliable signal for a potential reversal on its own.