Trading Forex with Candle

• Direction: Bearish
• Type: Reversal
• Reliability: Weak
• First day is long blue candle continuing an established uptrend.
• Day-two is a small candle or start whose range is within the first days body,
above its midpoint.

Bearish Haramis are characterized by a long blue day followed by a small candle, also refers to as a star. The trading range of the star stays within the body of the previous days candle. The significance of this formation is quite clear, as price continues its uptrend it is halted by a bearish candle.

Bearish Haramis are very weak in signal strength though, since even in a strong bull trend it is very reasonable to see a sell-off that pulls price back down from highs. Longs paring off their exposure may cause this. Thus candlestick analysts will watch for bearish days to come, but probably not bet on them.

In non-FX markets gaps seen above that allow the star to occur deep within the body of the first days candle are typical. Such gaps are just not possible in Foreign Exchange Markets. Since the Forex Market version of this candle is more nuanced, traders pay attention to several details.

This formation is very similar to the Bearhish Engulfing formation, except that the Harami move does not trade below the previous candles body. Because Harami sellers are not able to drive price much past the previous days midpoint, this patterns offers a weaker signal.

In range bound markets this formation will occur frequently with little significance. But if this pattern occurs after a protracted uptrend, analysts will attach greater importance to it.

Lastly if this does turn out to be a reversal pattern the high of the two candles will likely turn into a significant resistance level.