Candlestick charting is a very powerful tool in the trading arsenal of any trader. There are many candlestick patterns that can signal the continuation of a trend or the reversal of a trend. Some candlestick patterns are simple like the single stick patterns. While other candlestick patterns are complex like the two stick or the three stick patterns. A Harami pattern is a two stick pattern that takes two days to form on a daily chart. It is can bullish as well as bearish. A Harami is formed when the first day candle is longer than the second day candle.
A bullish Harami is formed in a downtrend when the first day candle is very bearish. But on the second day, the bulls come into play and beat the bears out of the market by taking the prices higher. However, the bulls are not completely successful and the second day is still lower than the first day open and the first day high is not crossed. But this is an important signal that bulls are now active and trying to take hold of the market. This means that the downtrend will be soon over and an uptrend is about to start.
On the second day when the Harami is formed, the bears are still slightly ahead of the bulls at the start of trading. The open is higher than the close of the last day. However, the bulls close the day higher than the open.
What this means is that the bulls are still cautious about their success and fear that the bears might return to take the prices lower again. However, when this does not happen, it gives confidence to the bulls encouraging more buying in the market and the reversal of the trend.
Now, like most of the candlestick patterns, a Harami can fail. What this means is that you need to confirm it with the price action on the following day. Always place the stop loss first when you trade. When you spot a Harami, place the stop loss near the open of the second day.
Harami pattern has got few variations. On of them is the Bullish Harami Cross Pattern. Now,a Bullish Harami Cross is not formed very frequently. But when it does form, it means an sudden trend reversal. So you should act immediatetly when you spot it. The first day in case of a Bullish Harami Cross is a bearish candle. The signal day or the second day is a Bullish Doji with an open higher than the close of the first day and the close lower than the open of the first day.
The bearish Harami is similar to a bullish Harami. It is formed in an uptrend. The first day is a usual bullish candle that forms in an uptrend. The second day candle is a bearish candle. It's open is lower than the close of the first day. And it's close is higher than the open of the first day. What this indicates is that bears have taken hold of the market now and are about to push the prices down signalling a downtrend is about to start! - 31876
A bullish Harami is formed in a downtrend when the first day candle is very bearish. But on the second day, the bulls come into play and beat the bears out of the market by taking the prices higher. However, the bulls are not completely successful and the second day is still lower than the first day open and the first day high is not crossed. But this is an important signal that bulls are now active and trying to take hold of the market. This means that the downtrend will be soon over and an uptrend is about to start.
On the second day when the Harami is formed, the bears are still slightly ahead of the bulls at the start of trading. The open is higher than the close of the last day. However, the bulls close the day higher than the open.
What this means is that the bulls are still cautious about their success and fear that the bears might return to take the prices lower again. However, when this does not happen, it gives confidence to the bulls encouraging more buying in the market and the reversal of the trend.
Now, like most of the candlestick patterns, a Harami can fail. What this means is that you need to confirm it with the price action on the following day. Always place the stop loss first when you trade. When you spot a Harami, place the stop loss near the open of the second day.
Harami pattern has got few variations. On of them is the Bullish Harami Cross Pattern. Now,a Bullish Harami Cross is not formed very frequently. But when it does form, it means an sudden trend reversal. So you should act immediatetly when you spot it. The first day in case of a Bullish Harami Cross is a bearish candle. The signal day or the second day is a Bullish Doji with an open higher than the close of the first day and the close lower than the open of the first day.
The bearish Harami is similar to a bullish Harami. It is formed in an uptrend. The first day is a usual bullish candle that forms in an uptrend. The second day candle is a bearish candle. It's open is lower than the close of the first day. And it's close is higher than the open of the first day. What this indicates is that bears have taken hold of the market now and are about to push the prices down signalling a downtrend is about to start! - 31876
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Mr. Ahmad Hassam has done Masters from Harvard University. Get these Forex Scalping Cheatsheets FREE! Master these Candlestick Patterns with this FREE 82 page PDF Candlestick Guide!
