An Introduction to Harami

The word Harami in Japanese means pregnant. A Harami candle formation is a two candlestick pattern. In an ideal form the first candle has a long real body and the second candle is a spinning top. The real body of the second candle is located within the body of the first candle. In other words open and close of the second candle are within the open and close of the first candle. The Harami pattern is similar to the inside day Western pattern. If the second candle is a doji then Harami is called Harami Cross or Petrifying Pattern (see image).

Harami

The second candle (i.e. the smaller one) could be a doji, a bearish candle, or a bullish candle both in bearish and bullish situations.

Bullish Harami

If the first candle of Harami is a long bearish candle then the pattern has bullish implications. Especially if the pattern appears at the bottom of a downtrend then it could be a sign of reversal (see image).

Bullish

If the second candle is a doji or a bullish spinning top then the reversal sign could be more reliable but there are times that even a bearish spinning top could be a good sign of reversal. Since this pattern is not a reliable one at all times, the best practice is to use other tools to confirm it. I have personally found Bollinger Bands (BB) to be a good tool for this purpose. You may also use the Enhanced Bands indicator which could be even better as combines both BB and volatility to predict the bottoms and tops of the market.




Bearish Harami

If the first candle of Harami is a long bullish candle then the pattern has bearish implications. Especially if the pattern appears on top of an uptrend then it could be a sign of reversal (see image).

Bearish

If the second candle is a doji or a bearish spinning top then the reversal sign could be more reliable but there are times that even a bullish spinning top could be a good sign of reversal. Since this pattern is not a reliable one at all times, the best practice is to use other tools to confirm it. I have personally found Bollinger Bands (BB) to be a good tool for this purpose. You may also use the Enhanced Bands indicator which could be even better as combines both BB and volatility to predict the bottoms and tops of the market.

Harami patterns could appear both as continuation and reversal signs.

Locating the Harami Formation in a Chart

I have developed a custom indicator for MetaTrader 4 that locates Harami in a chart (see image). The indicator shows bullish Harami with green arrows on top of the second candle and bearish Harami with red arrows below the second candle. It also locates other Harami like formations that could not be specifically called bullish or bearish. You may use other tools to decide about the direction of these patterns or alternatively ignore them (see image).

locating

Download the Harami Indicator [download]

Click here to download the compiled version of this indicator. I have designed the indicator for MetaTrader 4 (MT4). If you are not using the latest build of MT4 then you may encounter technical problems. Click here for more information and possible solutions.

If you are not familiar with using custom indicators then click here.

If you are one of my MQL students you may download the source code of this indicator from your training site. Click here for more information about my MQL training program. You may also click here for more information about different options that I offer for training MQL (one of them is absolutely free).

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