A small candle whose body sits entirely inside the previous, much larger candle's body, signalling that momentum has paused.
Harami is Japanese for pregnant, describing the large body containing the small one. A bullish harami is a small candle inside a big red one after a decline; a bearish harami is a small candle inside a big green one after a rally.
The message is contraction, not reversal. After a violent candle, a narrow one says the aggressive side has stopped pressing. That often precedes a turn, but just as often precedes continuation once the pause resolves.
Because of that ambiguity, most traders trade the resolution rather than the harami itself: wait for a close outside the range of the large candle and go that way, with the opposite side as the stop. This makes a harami closely related to the inside-bar, which uses the full range instead of just the bodies.
Original diagrams for the ideas on this page. Illustrative, not real market data.
The parts of a candlestick. One candle sums up a slice of time: the thick real body runs from the opening price to the closing price, and the thin wicks reach out to the highest and lowest prices traded. Colour tells you which way the body ran.Range versus trend. On the left price keeps bouncing between the same floor and ceiling, which is a range. On the right each high and each low is higher than the last, inside a pair of sloping lines called a channel.
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