Trading Technique

Different shapes of the candlesticks

Typical candlesticks & Marubozu
Doji
Hammer and Hanging Man & Shooting Star
High Wave & Engulfing Pattern
Dark Cloud Cover
Piercing Line

Harami
Morning and Evening Star and Abandoned Baby

Tweezers

4. Harami

Harami means pregnant in Japanese. Harami pattern is formed by two candlesticks. One big (the mother) and one small (the baby). The bigger one covers the whole or at least the real body of the smaller one. Harami can be seen both at the top of an uptrend or at the bottom of a downtrend. The small candle can be formed any where along the length of the big candle but the important thing is that it should be covered by the big candlestick.

The more difference between the size of two candlesticks, the more effective and potent the signal is.

Like the Dark Cloud Cover, Piercing Line and Harami can work as reversal signals but they have to be confirmed by the next candlesticks. These patterns can not be known as reliable and strong reversal signals.

If you already have a position and you have some profit in your hands, when you see any of the above patterns, you have to close your trade or at least tighten your stop loss and wait for the market to go ahead.

If it changes the direction, you will be safe because you already collected your profit or your stop loss will protect your profit and if it keeps on moving to the same direction, you will make more profit.

When the small candlestick in Harami pattern is a Doji, the pattern is called Harami Cross. A long body candlestick followed by a Doji which is covered by the long candlestick should not be ignored at all:

* Morning and Evening Star and Abandoned Baby

* Tweezers