Anger management - How to manage bad temper?

Kill it. Uproot it from your heart by persistent meditation practice. Do a lot of metta to cleanse your heart from any kind of negative thought.

Having killed what do you sleep in ease? Having killed what do you not grieve? Of the slaying of what one thing does Gotama approve?

[The Buddha:] Having killed anger you sleep in ease. Having killed anger you do not grieve. The noble ones praise the slaying of anger — with its honeyed crest & poison root — for having killed it you do not grieve.

-- Ghatva Sutta

Samatha calms the mind and its formations. This leads the practitioner to abandoning the five hindrances.

Just note that your mind has wandered as soon as you realize it has happened. With enough practice you will immediately recognize when the mind has wandered to one of the five hindrances. With even more practice the mind will stop wandering. Eventually a practitioner will develop Jhana, the culmination of samatha practice, where they can attain a tranquil state instantly.

It just takes practice and patience.

I used to have a problem with anger. I have found that mindfulness meditation (in my case, part Samatha and part Vispasana) works well but that the most powerful tool is compassionate meditation, also called Metta meditation.

Here's an example from http://viewonbuddhism.org/Meditations/equanimity_compassion_meditation.html:

Visualise in front of you three persons: at the left a good friend, in the middle a stranger, to the right an enemy or someone you cannot stand.
- Concentrate on the friend in front and examine your feelings towards him or her.
- Now concentrate on the stranger and examine your feelings towards him or her.
- Now concentrate on the enemy and examine your feelings towards him or her.
- Return to the stranger and realise that this person can easily become your friend or enemy in the future.
- Next, look at the friend and realise that this person may become your enemy in the future when cheating or hurting you.
- Now, look at the enemy and realise that this person may become your friend in the future when helping you.
- Again look at your friend and try to strongly feel love and appreciation.
- Now look at the stranger and try to hold this feeling towards this person.
- Again look at your friend and try to strongly feel love and appreciation.
- Now try to hold this feeling while looking at the enemy; is it really impossible to feel some love and compassion for this person?
- Try to realise that all three, friend, stranger and enemy are completely equal in trying to become happy and trying to avoid suffering.

What I personally do is use a Loving Kindness Meditation (LKM):

May you be happy
May you be healthy
May you be safe
May you live with ease

First I focus on a loved one. Then a friend. Then someone I feel neutral about. Then someone I dislike.

In the moment if someone is verbally attacking me or being otherwise disquieting I think to myself, "This person is suffering. They think that what they are doing now will ease their suffering. But it won't." And then I do the LKM silently to myself.

And at all times when I am in danger of losing my equanimity I focus on my breath.

Finally, I forgive myself if I fail and get angry. I am not enlightened, I am just another traveler on the path.

Loving kindness or Metta meditation is the one recommended to counter anger. What you are talking about is a Vipassana meditation. Both work! But you need to keep practicing. The more you practice, the quicker you can observe. For me personally, observing the Anatta nature of anger helps to dissipate it fast.

"sometime it is little bit too late to observer the anger" - Even here you can notice Anatta. You are late to notice it, because it came into your mind without your consent. And you can't make it go away just by wishing. It means anger is not a part of you. Because it doesn't behave according to your liking. So, if it has nothing to do with you, why react? Furthermore, anger isn't even it's own self. Because anger cannot arise on it's own. If you saw someone and got angry, that required a functional eye, light hitting the eye, presence of a mind at that moment. Anger couldn't have arisen if any of the 3 was missing.