Trading Using The Harami Candlestic Patterns
What is a Harami Candlestick Pattern
The candlestick pattern comprises of two candles which indicates a potential reversal or continuation in the market, the word ‘Harami’ is derived from the Japanese word for ‘pregnant’ which is the main reason why it is sometimes called a Japanese candle. The shape of the pattern looks like a pregnant women and it indicates a bullish or a bearish move which is likely to take place.
Bullish Japanese candle
A bullish Harami is a candlestick chart indicator suggesting that a bearish trend may be coming to end. Some investors may look at a bullish harami as a good sign that they should enter a long position on an asset
- Confirmed downtrend
- Leading larger bearish (red) candle, followed by a smaller bullish green candle – price gaps up after bearish candle and is contained within the open and close of the leading bearish candle
Bearish Japanese candle
A bearish Harami is a two bar Japanese candlestick pattern that suggests prices may soon reverse to the downside. The pattern is made up of a long blue or green candle followed by a small red candle.
- Confirmed uptrend
- Leading larger bullish (green) candle, followed by a smaller bearish red candle – price gaps down after bullish candle and is contained within the open and close of the leading bullish candle
The confirming candle in the pattern is used as a tool to tell traders if the smaller trailing gives life to a reversal or follows the trend with the starting candle. The popularity of the Harami pattern and other candlestick patterns is due to the ability to catch a reversal at the most opportune time with tight risk. This will allow traders to have very favorable risk reward ratio.
Advantages of the pattern
- Because of its shape it is easy to identify it in the complex market
- You can maximize on the long swing trades as per the indication with reduced risk
- It has been proved to give accurate indications by many expert traders
Disadvantages of the pattern
- It requires due diligence in analysis before application