Candlestick patterns are very helpful in identifying potential directions and changes in the market when trading binary options. The Harami candle pattern is one of the most useful.
Harami Candlestick Chart Pattern In Binary Options Trading
Here, we will show you step-by-step, how you can apply the Harami candlestick chart pattern to your binary options trading strategy.
How to identify a basic Harami pattern
A Harami candlestick pattern has several distinct attributes. The pattern features two candles: the first is a bullish and large candle and a second smaller candle follows it. This second candle should not close outside the body of the first candle—this is perhaps the best way to identify the Harami pattern. To confirm that the Harami is forming, check to see that the second small candle has closed above the traded value of the body of the first candle.
When a bearish Harami forms, there is usually an end to the bullish market. However, a bearish Harami pattern is typically weak because it is not necessarily an indication of a complete market reversal. As such, the Harami pattern requires a third candle for one to fully confirm that the pattern has formed.
Applying the Harami candlestick pattern to your trading strategy
Traders can apply the bearish Harami candlestick pattern to any trending trading strategy. When this pattern appears, it is possible to profit from long trades or to trade a complete reversal.
As you start applying the Harami pattern, you will inevitably come across the Doji Candlestick. When you identify a Doji candlestick, it is a possible indication that a reversal might take place soon, giving you a good opportunity to enter the market.
Dojis are typically made up of one candle. This candle closes and opens close to the same level. The candlestick is also composed of a lower and upper wick that is out of the body and takes a positive (+) sign. The candle that follows the Doji indicates the most appropriate trade preference you should demonstrate at that particular time.
As soon as a Doji pattern forms, it is important for traders to take notice of the other moving averages. This will help to identify whether the pair is close to support level, where candlestick patterns demonstrate the highest potency.
So let’s go back to the Harami pattern…
The Harami is a strong Doji pattern because it assesses each candle on each side of the Doji to provide you with a clear indication of the direction of the market. The candle that comes before the Doji should face in the direction of the prevailing trend while the real body will be bigger than the Doji’s body. The candle that comes third after the Doji will approve the reversal trend if it goes against the direction of the first candle or disconfirm the Harami pattern if the prevailing trend continues after the Doji.
In summary, the first Harami candle before the Doji pattern is large and it continue with the immediate trend. Meanwhile, the Doji itself is a small candle. The second candle that makes up the Harami pattern will give an indication when the Doji causes a reversal or continues the trend set by the first candle. The Harami can be very effective at identifying a reversal at the right time, allowing you to take advantage of the lucrative risk: reward ratio.