Traders and investors use candlestick patterns widely. In fact, they believe that candlesticks are able to show the edge of market. Harami candlestick pattern is one of the candlesticks, which traders use to study the next move of market. One can use this pattern either to study the cryptocurrency market or any other financial market.
Harami is a Japanese pattern that be used to identify trend reversal or extensions. Actually, The word “Harami” in Japanese means ‘pregnant’ which is representing the shape of the candlestick. There are two different types of “Bullish” and “Bearish” Harami candlesticks. In this article we are going to talk more about it and learn how to use it to predict a potential reversal or continuation in the market.
Harami candlestick pattern features:
- Easy to identify
- Opportunity to capitalize on large movements with high risk-reward ratios
- Requires confirmation before execution
To identify the Harami pattern, investors must first look for daily market performance reported in candlestick pattern. This pattern emerges over two or more days of trading.
The Harami candlestick pattern occurs in two forms of bearish and bullish. Both mentioned forms signal depending on the validating candle. In addition, traders utilize other technical indicators to support the pattern to have a better analyze from the market.
A bearish Harami consists of a long green candle followed by a small red one, which suggests that prices may soon reverse to the downside. Consequently, the opening and closing prices of the second candle must be contained within the body of the first candle. When traders interpret the Harami candlesticks, analyzing the previous trends and also price action will give the trader greater insight and ability to predict the implications of the Harami pattern.
To increase the chance of successful trade, usually traders use other technical indicators such as relative strength index (RSI) and the stochastic oscillator at the same time.
A bullish Harami is a candlestick chart indicator for reversal in a bear price movement. In fact, it suggests that a bearish trend may coming to end and the current upward trend will continue. It occurs by a green candle that can be contained within the red candle. Investors usually look at bullish Harami as a positive sign that they should buy an asset at the time.