The King's Trader Education

The Trading Plan
The Simpleton's Fibonacci
Fibonacci 101
Fibonacci 102
Fibonacci 103
Practiical Candlestick - Basic Patterns
Steve Nison - Interview with Father of Candlesticks
Steve Nison - Favorite Candlestick Signal
Practical Candlestick - Seedwaves
Practical Candlestick - OBV
Practical Candlestick - Harami
Pivot Points
Basics of Bollinger Bands
Distribution/Accumulation Zones
Donchian Channels
Elliott Waves
Market Structures
Multiple Moving Averages - "The Rope"
Three Price Break
Elements of Gann Angles
Gann Percentage Pivots
Gann on 1929
Options - Basics
Options - Indexes and ETFs
Options - Greek
Options - Covered Calls
Options - Spreads
Options - Straddle
Options - Strangle
Options - Calendar Spreads & Options Repair Strategy
Sector Trading
Swing Trading
Position Trading
TICK & TRIN Tutorial
TICK & TRIN - Sustained Reversal

Trader Training - Free Educational Trading Articles:

Practical Candlestick - Harami

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There are many versions of this pattern, and for this issue, let’s look at the basic ones. If you already have the Volume I of Nison’s books you can read about these in Chapter 6.

Harami patterns are major reversal signals. “Harami” is an old Japanese word for pregnant. It is a two-candle pattern that is created from a long sized candle with a large real body, the “mother,” followed by a smaller candle that stays within the price extremes of the first candle, the “baby.” The second candle in the pattern must have a small real body, or even better, be an outright doji candle. You western charts bar line guys would call this second candle an “inside day.” Same thing, but our way is more fun and interesting.

We talked in the last column on candlesticks about the “engulfing patterns.” Haramis are basically the opposite of engulfing. With engulfing patterns, the second candle is always larger than the first -AND- the colors of the candle must be opposites. Although haramis usually have opposite colors, this is not a requirement for the pattern. Some of the candle patterns we showed you last time, like the “hammer” candle and the “hanging man” candle, can be much stronger candles but haramis are a great tool to add to your arsenal, once you know how to spot them.

Let’s check out the first one, the Harami Brake:

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"It takes a man a long time to learn all the lessons of all of his mistakes. They say there are two sides to everything. But there is only one side to the stock market; and it is not the bull side or the bear side, but the right side. It took me longer to get that general principle fixed firmly in my mind than it did most of the more technical phases of the game of stock speculation" ----from REMINISCENCES OF A STOCK OPERATOR