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Trading the Harami
by Steve Crooks

April 21, 2007

The Harami pattern is composed of two candles. The body of the first candle is the same color as the current trend, normally black or red for a downtrending market and white or green for an uptrending market. The first candle of the pattern has a long body, the second candles body is shorter. The open and the close of the second candle occurs inside the open and the close of the first candle. The presence of an Harami indicates that a trend may be over.

Because the harami indicates that the trend could be reversing, it signals that it might be a good time to enter into a trading position in line with the reversal. The smaller the second candlestick, the more likely the reversal. In the case of the bullish harami; the higher the second candle closes up on the first candle the more likely the reversal has occured. For the bearish harami, the opposite is the case; the lower the second candle closes down on the first, the more likely the reversal.

These patterns need confirmation and should not be seen as a complete reversal. Unless you are a very aggressive trader, a confirmation of the reversal should be seen before committing to a trade.

This article does not represent an in depth study of this pattern, so I would suggest further study before using it in your trading.

Steve Crooks is the webmaster of CTWorkshops and of
The Candlestick Trading Workshops. He is also the author
of two books on Japanese Candlesticks and Online Digital
Options. Steve runs various workshops on the subject of
Trading including 1-2-1 sessions and group workshops of
15 persons or less. He is also an active Trader himself.

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