The Harami pattern is found in the Japanese candlesticks chart. Its name in Japanese means a pregnant woman. It has the form of two consecutive candles, one big and the second small. The pattern indicates the possibility of a change in a trend.
The Harami pattern, as I already mentioned, consists of a pair of candles. It usually proclaims the current trend is going to an end.
The first Harami candle is long and it is in green color in the case of the uptrend, and in red in case of the downtrend.
The second Harami candle is short and in the color opposite to the first one. It means it will be a short reddish candle when there was an uptrend, and a short bullish one when there was a downtrend.
Key Takeaways🔑
| →The Harami pattern is a Japanese candlestick chart pattern that suggests a potential change in market trend. |
| →This pattern consists of two consecutive candles of differing sizes and colors, which metaphorically represents a ‘pregnant woman’ in Japanese. |
| →While the Harami pattern could indicate a trend reversal, it’s essential to conduct further analysis as it could also suggest a mere price correction. |
Contents
Reading the Harami pattern
In a continuing trend, the candles are of the same color. When there is a long candle, the trend is strong. But whenever a candle in different color appears, it might be a signal of the change in the trend. In the Harami pattern, this candle of the opposite color is significantly shorter than the one before. Moreover, it usually unfolds within the body of the one previously made. Whenever you notice Harami candles, the reversal of the trend is very much likely. The other choice is inevitable price correction before the market continues in the former direction.
Pros and Cons 👍👎
Pros:
- The Harami pattern can provide early signals for potential trend reversals.
- It is widely recognized and used by traders, enhancing its reliability.
- It can be used in various markets and timeframes.
Cons:
- The pattern might be a false signal, as it can also indicate a temporary pause in the trend rather than a reversal.
- It needs confirmation from subsequent candles or other technical analysis tools.
- Not foolproof and must be used in conjunction with a well-planned risk management strategy.
| Harami Pattern Element | Description |
|---|---|
| First Candle | A long candle that follows the direction of the prevailing trend. |
| Second Candle | A shorter candle of the opposite color that opens and closes within the body of the first candle. |
Trading with Harami pattern on the Olymp Trade platform
Because of the uncertainty, if Harami candles represent the trend reversal or price correction, it is best to use the described pattern for long term trading. In the above chart example, the chosen timeframe is 1 day. The most reasonable moment to enter the position is the development of the third, green candle. That candle clearly shows the trend will go up. The trading interval should be 1 day.
You have now the necessary knowledge about the Harami pattern so it is time to put it into practice. Try it on the free Olymp Trade demo account before you go real. Just be extremely careful of your trades, as there isn’t any risk-free strategy and you will most likely incur losses along the way. Always be prepared to deal with things that aren’t going according to plan.
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Best of luck!
Q&A Section 💡
- Q: What is the Harami pattern in trading?
- A: The Harami pattern is a candlestick pattern that consists of two candles and suggests a potential trend reversal or a pause in the current trend.
- Q: How reliable is the Harami pattern?
- A: Like any technical analysis tool, the Harami pattern isn’t 100% accurate and should be used in conjunction with other indicators or strategies.
- Q: Can the Harami pattern be used for all time frames?
- A: Yes, the Harami pattern can be used on any timeframe, but confirmations from subsequent candles or other indicators are crucial.
- Q: Does a Harami pattern always indicate a trend reversal?
- A: Not always. While the Harami pattern might suggest a potential trend reversal, it could also indicate a temporary pause or consolidation in the current trend.