Understanding the Harami Cross

What is the Harami Cross?

The Harami Cross is a variation of the Harami pattern, characterized by the smaller candlestick having a Doji or a spinning top formation. This pattern signifies indecision in the market and suggests a potential reversal in market direction.

How is the Harami Cross Identified?

The pattern is identified by:

1. First Candle: A large bullish or bearish candlestick.
2. Second Candle: A smaller candle with a Doji or spinning top formation that is entirely contained within the range of the first candle’s body.

When to Use the Harami Cross

The Harami Cross pattern is used to:

• Identify Reversals: It can signal a potential reversal of the current trend, especially when appearing after a strong move.
• Confirm with Other Indicators: Combining this pattern with other technical indicators can enhance the reliability of the reversal signal.

Formula Example

To identify the Harami Cross pattern:

1. Check the First Candle:
   • Condition: A large candle with a significant body.
2. Verify the Second Candle:
   • Condition: The second candle should be a Doji or spinning top and entirely within the range of the first candle’s body.

For example:

• First Candle: Open = 100, Close = 110
• Second Candle: Open = 105, Close = 105 (Doji)
• Condition Met: The Doji’s body is completely within the range of the first candle’s body, indicating a Harami Cross pattern.

Parameters

The parameters for identifying the Harami Cross pattern include:

• Data: Defines the type of data to use for the pattern.

  • Value: ohlc
  • Description: The pattern uses Open, High, Low, and Close prices.

• Previous N Candles: Number of preceding candles to check.

  • Default Value: 1
  • Min Value: 1
  • Max Value: 300
  • Description: Checks for the Harami Cross pattern in the last N candles.

• Pattern Type: Specifies whether to identify the pattern as bullish or bearish.

  • Default Value: :bullish
  • Drop Display Values: Bullish, Bearish
  • Drop Down Values: :bullish, :bearish
  • Description: Determines the type of Harami Cross pattern to identify.

Conclusion

The Harami Cross pattern indicates indecision in the market and can signal a potential reversal. It is a powerful tool when combined with other technical indicators to confirm the reversal and make informed trading decisions.