Harami Candlestick Pattern
The harami candlestick pattern comes in two forms, both representing a possible reversal. The harami candlestick pattern consists of two candles of opposite color; the first one having a long body and in the direction of the current trend, and the second one with a shorter body engulfed by the previous candle and with a color opposing the current trend.
Harami Candlestick Pattern Candlestick Analysis
The harami candlestick pattern represents failed attempts to move the market higher or lower. Just as with other candlestick patterns the harami formation is only relevant when it is part of an established trend.
The harami candlestick pattern candlestick becomes increasingly relevant when the following occur:
- The first candle is at relatively large and at least twice the size of the second candle.
- It is preceded by a strong trend.
- Confirmation candles are used to confirm the reversal
- Overbought and oversold indicators confirm a change in market direction.
Forex Trading Ideas
The harami candlestick pattern may be traded alone, or with a combination of signals and/or indicators. For example:
- Step 1 – Wait for a harami candlestick pattern to appear during an established trend.
- Step 2 - Confirm the trend reversal with at least one confirmation candle.
- Step 3 – Further confirm overbought or oversold conditions using the Stochastic Oscillator*
- Once conditions 1 – 3 are met place an entry order.
*Additional confirmation ideas – confirm the harami candlestick pattern formation when it appears outside of an outer Bollinger Band or when the RSI signals overbought or oversold conditions.
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