1. Understanding the Harami Cross candle:
what are you looking for
A large candle (either green bullish or red bearish), followed by a very small candle in the shape of a "cross" (called a Doji).
Interpretation:
If this candle appears after a strong uptrend:
This means that the upward momentum is starting to weaken, and there is a strong possibility that the market will start to decline.
If it appears after a strong downtrend:
The downward momentum is slowing down, and there is a possibility that the market may start to rise.
Practical example:
If you are trading in the currency market (such as the EUR/USD pair) and this pattern appears after a strong upward movement, wait for confirmation of the decline through additional signals, such as a break of a support level or an increase in trading volume on the decline.
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2. Understanding Bullish & Bearish Harami Candles:
Bullish Harami (Positive):
It usually appears after a downtrend.
Practical example:
You have a chart of a currency pair or stock, and the trend is down. Suddenly a big red (bearish) candle appears followed by a small green candle inside the body of the first candle.
Expectation: The probability of the price rising after the pattern.
Bearish Harami (Negative):
Appears after an uptrend.
Practical example:
In a stock or currency chart, the trend is up. A large green candle appears followed by a small red candle inside the body of the first candle.
Expectation: The price will likely fall after the pattern.
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How do you use these patterns?
1. Wait for confirmation:
Don't rely on the pattern alone! After the candles appear, watch for other signals such as:
Breaking a support or resistance level.
Technical indicators (RSI or MACD) to see if the trend supports the pattern.
Volume: Confirmation of the strength of the reversal.
2. Determine the entry point:
Entry is after confirmation of the reversal.
Example: If a Bearish Harami appears, wait for the price to close below the low of the second candle to enter a sell trade.
3. Set Stop Loss:
Place your stop loss above the high of the large candle (for a bearish pattern) or below the low of the large candle (for a bullish pattern).
4. Set goals:
Use support and resistance levels to set your targets.
Example: If you enter a sell trade after a Bearish Harami, set your target at the next support level.
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Do you have an example of a particular chart you want to analyze? Or need help applying this to a trading instrument?