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Harami

Table of Contents

The Harami Pattern in Trading

The term “Harami” is a Japanese word that means “pregnant” or “body within.” In the world of trading, the Harami pattern is a candlestick chart pattern that signals a potential reversal in the current trend. This pattern consists of two candlesticks, where the first candle is larger and encompasses the second candle, which is smaller and is entirely “contained” within the first candle’s body.

Understanding the Harami Pattern

When the Harami pattern appears after a prolonged uptrend or downtrend, it suggests that the market sentiment may be reversing. Traders typically look for confirmation signals, such as a third candle that supports the reversal pattern.

Interpreting the Harami Pattern

Traders interpret the Harami pattern based on the size and position of the two candles. If the second candle is a doji (a candle with a small real body), the pattern is considered stronger. Additionally, the position of the pattern relative to support or resistance levels can provide further insights into the potential direction of the reversal.

Using the Harami Pattern in Trading

Traders often use the Harami pattern in conjunction with other technical indicators and analysis tools to confirm potential trade opportunities. It’s essential to consider the overall market context and risk management strategies when incorporating the Harami pattern into trading decisions.