Harami Cross Overview, Bullish and Bearish, Advantages

The trend reversal signified by Harami Cross is more likely to happen than that signified by regular Harami. A bearish harami cross occurs in an uptrend, where an up candle is followed by a doji—the session where the candlestick has a virtually equal open and close. The low of the bearish harami cross pattern occurs at $80.17 on the first candle. On the first day after pattern identification, the price does not drop below the low, so no action is taken.

Let’s examine its occurrence in a cryptocurrency, such as Bitcoin. The first candle represents a significant upward move, indicating a strong buying presence. The ensuing doji reflects indecision, raising the possibility of a trend reversal.

Some traders may opt to enter positions once the harami cross appears. If entering long on a bullish harami cross, a stop loss can be placed below the doji low or below the low of the first candlestick. A possible place to enter the long is when the price moves above the open of the first candle. Beyond signaling potential reversals, the harami cross can be a valuable tool in trend analysis.

This section examines how the pattern manifests in short-term intraday charts versus longer-term daily or weekly charts. Traders who understand these nuances can tailor their strategies based on their preferred trading timeframes, ensuring the harami cross remains a versatile tool in their analytical toolkit. This subheading discusses how traders can integrate harami crosses into their risk management strategies. Delving further into the realm of harami crosses, traders can explore variations of this pattern for more nuanced strategies.

The size of the second candle determines the pattern’s potency; the smaller it is, the higher the chance there is of a reversal occurring. The opposite pattern to a bearish harami is a bullish harami, which is preceded by a downtrend and suggests prices may reverse to the upside. At the top, we spot a bearish Harami candlestick pattern, which leads us to place the Fibonacci levels on the chart. If the price moves in your favor, follow the retracement with the Fibonacci levels. Similarly, close the position when the price breaks a key Fibonacci support level or when the exponential moving average is broken in the opposite direction of the primary trend. This section examines the historical performance of the harami cross pattern across various markets and timeframes.

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Once the pattern is identified, intelligent traders will wait for a break of the high of the pattern and then enter short when the price retraces through that same high. And while not optimal, trading the volatility bearish is also a profitable proposition. But before we optimize, let’s understand how most professional traders erroneously trade this specific pattern. Be sure to read about these candle patterns and download our free cheat sheet. Although the stochastics are one of the faster oscillators, it might take forever until you match your candle pattern with an overbought/oversold signal. The EMA plus Fibonacci strategy is strongly profitable, but sometimes the fast EMA could knock you out of a winning trade relatively early.

• Another variation of the Bearish Harami Cross is the bearish harami, which is similar but with a Doji candle as the second candle instead of a black one.
• The large preceding candle would signify climactic conditions in that regard.
• However, the price doesn’t close above the EMA with its full body.

For a bullish harami cross, some traders may act on the pattern as it forms, while others will wait for confirmation. In addition to confirmation, traders may also give a bullish harami cross more weight or significance if it occurs at a major support level. If it does, there is a greater chance of a larger price move to the upside, especially if there is no nearby resistance overhead. As we conclude our in-depth exploration of the harami cross, it’s clear that successful traders continually evolve their strategies.

Trading the Harami

By keeping an eye out for this pattern and acting on it when it appears, traders can potentially capitalize on potential trend reversals and take advantage of any opportunities that may arise. As with any trading strategy, it’s important to use this pattern in combination with other forms of analysis and to always manage risk carefully. The Bearish Harami Cross is not a standalone pattern and should be used in conjunction with other technical analysis tools and indicators to confirm a potential trend reversal. Additionally, it’s essential to understand the context of the market and the underlying fundamentals that may be driving the price action. The bullish harami cross candlestick pattern is the opposite of its bearish sibling.

Since the Harami is a reversal pattern, we need a way to measure the likelihood of successful signal to reduce the noise. This is where a fast oscillator can be of great assistance in terms of trade validation. The further decrease in price then creates a bottom, marked with a green line. The double top that came in the form of a bearish engulfing candlestick gave us that added confirmation that we really did see a top of some sort. But the important point was the fact that we saw other candlestick formations confirm what the harami cross was telling us. If you want a few bones from my Encyclopedia of candlestick charts book, here are three to chew on.

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The bullish harami cross occurs after a downtrend, featuring a large down candle followed by a doji. Conversely, the bearish harami cross follows an uptrend, comprising a large up candle followed by a doji. The Bearish Harami Cross appears in an uptrend and predicts its reversal. The patterns should be confirmed on the nearest following candles. A doji candle appearing as the second line indicates the market indecision.

Harami cross in different timeframes

While confirmation adds validity to the harami cross pattern, some traders may choose to act on the pattern as it forms. The decision to wait for confirmation or act immediately depends on individual trading styles and risk tolerance. Traders should carefully evaluate their approach based on their preferences and market conditions. External factors, such as economic news and events, can significantly impact market dynamics. This subheading explores how traders can validate harami crosses by considering concurrent news releases or major economic events.

Interestingly, in order to recognize the pattern as valid, its first line needs to be a long white candle, which may become an important support zone. For this reason, the one should be careful when such pattern is formed on the chart. Traders typically combine other technical indicators with a bearish harami to increase the effectiveness of its use as a trading signal. For, example, a trader may use a 200-day moving average to ensure the market is in a long-term downtrend and take a short position when a bearish harami forms during a retracement. A bearish harami is a two bar Japanese candlestick pattern that suggests prices may soon reverse to the downside. The pattern consists of a long white candle followed by a small black candle.

The bullish variant signals a possible upward reversal, while the bearish variant hints at a potential downward reversal. Many candlestick patterns have similar candlesticks to the bearish harami cross. It’s essential to understand the unique differences between these confusing patterns when using candlestick pattern technical analysis.

The lack of a real body after a strong move in the prior candle tells us with more certainty that the previous trend is coming to an end and that a reversal may be at hand. It is characterized bullish harami definition by having a very small real body almost to the point of being a doji. During a bullish move, the harami candlestick indicator tells us that strength in the previous candle is dissipating.

If you have an uptrend and you get a bearish harami candle, try confirming this signal with the stochastic. In this case, you will need an overbought signal from the stochastic. The Harami candlestick pattern is usually considered more of a secondary candlestick pattern.