I always heard it was with the "U" up, so your good luck would not run out...

I second the "U" shape. I have seen them hung this way before.

my google search returned with this.....

Q: What is the proper way to hang a horse shoe ?

A: Yours is a fun question, one that I think everyone will enjoy. History has shown horseshoes displayed with the heels both up and down. They can be found on silver coins from 300 BC., displayed on banners, and most recently above the door of many homes. More often than not, horseshoes placed above the door have the heels up and the ground surface of the shoe facing out. It is said that a horseshoe placed in this position over the door is good luck for all who are in this home. However, there are also horseshoes displayed with the heels down. The reasoning here is that from this shoe (with the heels down) good luck will flow down upon all who come and go through this doorway.

The tradition of putting a horseshoe over the door to bring good luck and keep the devil away has long been tradition. The story behind this tradition has many variations. This is one of them:

Once upon a time, a wise old blacksmith was hard at work making horseshoes. The sound of the anvil attracted the attention of the devil. He saw that the smith was making horseshoes, and he thought it would be a good idea to get his own hoofs shod. So the devil made a deal with the smith and stood to be shod.

The wise blacksmith saw with whom he was dealing, and so he nailed on a red-hot shoe, driving the nails square into the center of the devil's hoof. The devil then paid him and left; but the honest blacksmith threw the money into the forge fire, knowing it would bring him bad luck.

Meanwhile, the devil walked some distance and began to suffer the greatest torture from the new shoes. The more he danced and pranced and kicked and swore, the more they hurt him. finally, after he had gone through the most fearful agony, he tore them off and threw them away.

From that time to this, whenever the devil sees a horseshoe he turns and runs--anxious to keep out of the way of those torturous devices.

The above story is quoted from Dr. Doug Butler's book, The Principles of Horseshoeing.

Geronimo Bayard
The Village Blacksmith
Oakland, Oregon

Another, but similar story.........

A 10th century cleric, who later became The Archbishop of Canterbury, was know for his remarkable horseshoeing ability. The cleric, who later was canonized as St. Dunstan, was approached one day by the devil who asked him to shoe his cloven feet.

St. Dunstan agreed, though he recognized his customer as the incarnation of evil. First, though he insisted that the devil allow himself to be tied to the wall, arguging that otherwise the hoof would not remain still during the shoeing process. The devil argreed to - and then St. Dunstan made the procedure so painful that he soon had the devil in tears and begging for mercy. But St. Dunstan would not release him until he promised that he never again would enter a place that had a horseshoe nailed on the wall!

I have a horse shose in my bedroom above the door now I know how to hung it