Candlestick Patterns – Harami
Similar Posts
Buy because there are No More Sellers
From last weeks article (Return to First Principles)… You must aim to BUY at areas where you know others will buy after you, because their buying will create the net orderflow or bullish pressure to drive prices higher, allowing you opportunity to profit. You must aim to SELL at areas where you know others will…
Reversals Often Give Multiple Clues
In the absence of any unexpected news event, or some other reason to shock the market, a reversal will usually not just appear out of nowhere. V-Turn reversals happen. But they're not the usual outcome. More often than not, there will be multiple clues in the lead-up to the reversal. The challenge for you,…
Bar-by-Bar Analysis via One Simple Question
There are various analysis tasks that must be completed upon first arriving at our charting platform each day – examination of higher timeframes to create a support and resistance framework; examination of market structure in order to identify the potential environment (trending or ranging); and examination of any pre-session data that may be significant to…
A Bias-Changing Event
We're all familiar with the charts produced by news events that cause a sudden and massive expansion in volatility, as shown below in this example from my blog archives. (If you’re interested in the blog post associated with this chart, and an examination of the retest of support, you’ll find it in the YTC Newsletter…
Don’t Chase the Missed Entry… Unless Price does This…
The session begins… Don't chase the missed entry. But remain focused. Because sometimes, while price has still not reached the expected target area, it might offer a nice lower timeframe structure. Something that you can lean an entry against, which offers an acceptable level of risk. Something that still offers potential rewards, sufficient to…
Patience – Wait for the Trap
The last week was quite tough in many markets, with lots of sideways action and the occasional sharp directional moves in-between. In tough environments, it pays to be VERY patient. Don't push trades. Wait for the A-trades only; the ones which are screaming out to be taken. One that screams out to me is demonstrated…
Hi Lance,
is there difference between the harami cross and a doji, other then the shadows of the doji breaking the body of the prior candle?
The doji is a single-candle pattern. The harami cross is a two candle pattern, comprising a doji stuck within the body of the preceding candle. So the difference is in the mindset of those in a trade, who have sit through a stall in the directional movement, as the trend produces an inside bar. Sit in a trade which stalls and then breaks against your position. You’ll feel the difference. And as with all stalling or compressing action, there is potential for increased orderflow on the break (volatility contraction leads to volatility expansion). Noting of course that the effect here is likely small, being only a two-candle duration. Far more important than the pattern is where it’s occurring. Context is everything. Because you need others to trade to provide a sustained move. Context will tell you whether or not the orderflow from triggering the candlestick pattern should be sufficient to bring other traders into the market.
Thank you I got most of that. Unfortunately I’m not quite understanding the very last sentence of the reply, “Context will tell you whether or not the orderflow from triggering the candlestick pattern should be sufficient to bring other traders into the market.” Would you be willing to go into a little bit more detail in this? I do understand that all candle patterns such as this should only be paid attention to if they occur in proper setup areas near S/R, but I think I’m still missing the lesson here.
The influence of a 1,2 or 3 candle pattern in driving orderflow is small, limited maybe to the next few candles only. Don’t expect price to drive 100 ticks just because “OMG… it just broke a harami cross”. For sustained moves you want this pattern driven orderflow occurring in places where it might be sufficient to trigger NEW sources of orderflow. That is, it might create sufficient movement to convince other traders to enter, using different methods. For example, if the pattern occurs at S/R and you deem it sufficient to drive far enough to perhaps break the next swing high/low (bringing in breakout traders) or sufficiently far to cross MA’s (bringing in indicator traders) etc.
Ok that makes more sense now, thank you again.