All language subtitles for 7. Harami & Engulfing Candlestick Patterns

Let's talk harami and engulfing candlestick patterns are similar, but slightly different to, of course,

as well.

And let's start with the Harami and Harami actually means pregnant in Japanese.

And you can if you look over in that samples I have there on the left there, you could come to see

where you have a small real body comes after a bigger a bigger body before it.

Here we have a long candle and then we have a short real body in terms of after it.

So you can almost imagine it's like somebody might be pregnant or whatever.

And that's the idea behind a harami is that you have the small body coming after a big body candle and

you want to look at the color of the candle, make up its green, followed by red, would be a burish

type sign and red followed by green would be more of a bullish sign.

So in our example here, you can see that we have a red candle and then that is followed by a green

one.

So this would be a bullish one.

And you can kind of guess at that because you can see there's an upward trend following afterward.

And what Harami is really telling you is it's an indication that a change in sentiment is coming.

Something's coming.

So if you're looking for an indicator that say, hey, there might be a reversal or some change coming

here, Haramis can be very helpful for that.

And the smaller the real body on the second harami, the more powerful indication that the reversal

is coming.

If it's not too much difference between the two, then is not really a harami.

You're looking for a taller or longer real body candle, followed by a shorter kind of squat small one

followed by after it.

And you're looking at the real bodies of these candles a little more so than, let's say, the Wick's

going up or down, but that's where you're looking at these open and closes around the candle.

So if you're looking at this harami, you'd say, OK, we can see we've been in a definite downward

trend or we've got a couple, you know, basically three red candlesticks in a row, boom.

All of a sudden, this narrow trading range.

But opening the opening is low in the close's higher.

So that's the candle color to green that it's now a higher open or excuse me, a higher close than the

open after we've been in a downward trend signaling that's a trend.

Change might be coming.

Now, as we know with trends, we want to make sure we let the trend develop.

We could see this and say it's definitely harami and it turns out to be a false signal.

It's not harami at all.

So once we see the second day and certainly the third day now, we're starting to see more of a confirmation

that there a real trend reversal has occurred and that now we can be trading off of that.

How soon you get in, you might be a little bit more relate to your risk, you know, and how you want

to judge that.

And, B, whether you want to be quick on Harami or whether you want to look that form more and be a

little bit more confident.

Either way, you're looking at a real body, a bigger one, followed by a small one.

Just look at the way with which ones perceiving which to see whether that's a bearish single or a bullish

signal like the Harami engulfing Channel six also will signal a reversal of a trend.

So you're looking at trends and you're seeing if that's going to continue or be changed or reversed.

And that's where engulfing candlesticks work, just like Haramis.

But it's the kind if you look at the images on the left here, you can see what's highlighted the square.

It's kind of the opposite, right?

You don't have that that pregnant type look, you have the opposite where you have some of the shorter

and smaller being engulfed by something that's bigger.

And that's the key thing.

You have to wait for that second bar example in the box here to occur.

You can't just guess.

Oh, well, we have, let's say, an upward trend.

And also we got a shorter real body and say, oh, we're definitely going have a reversal.

That could not be true at all.

It could be just a little it's just a matter of a trading day.

And for in terms of open and closes in the trends is going to continue.

You know, they usually don't look this clean and neat.

You're looking for something that's going to engulf it.

And that's really what's happening is there's a wider range of the opening closing than the day before.

And if you look at either of the examples, you can see that the second day in the box is bigger or

wider or basically taller and it's going to completely engulf.

And that's the key thing.

It's going to completely cover or engulf the opening closing of the day before.

And if the higher if the open if you have a higher opening and a lower close in this engulfing candlestick,

that's a bearish sign.

Prices are going to start heading down and we have a lower open, but a higher closed than that's a

bullish signal.

And then prices will start rising both ways.

You're looking at the previous what's happened before to see if there's an established trend, because

this is all about trend reversals, you know, really works when there's a trend, not not so much when

there's no trend yet at all.

So we look at that example up in the top with the bearish and golfing.

We've got a nice, strong trend.

We've got higher highs going on there.

Even that small little short short one there of that candlestick is still a little bit higher than the

day before as far as the close.

And so everything's going green, everything's going up.

And then all of a sudden, what happens?

You have this big engulfing candlestick.

So you see that engulfs it.

You have this big red thing where the opening is opening higher than the day before, but then the close

is going to go lower than the close the day before.

And that's that's why it's a red candlestick.

And so that's telling there's a lot of downward selling pressure.

And that's what you need to wait for the next one to just confirm this will look like.

And some people you can trade right on Nancy up.

That looks a little bearish to me.

I'm just going to do it.

And that's OK.

You're taking more risk that way and you have a bigger chance of being wrong or a false signal.

But you can certainly do that as far as your own risk reward pattern around that.

But if I look at let's say, you know, now the second red candlestick that's coming outside the box

on this bearish and golfing, I can see, OK, now I'm seeing lower lows.

And so now I think we've got a true bearish and golfing pattern here.

And then I can if I own the security, I would sell it.

I would sell at some point here to get out because I already made my profits on that nice trend going

up.

And now I want to take my profits.

Now, if I look at the bullish engulfing, maybe this is a security we're not in because it's going

down in price.

We have a definite downward trend with all those red candles down there.

And then we have the similar thing, just just the opposite.

We have a lower low, a short body in the red that's then engulfed by this nice big green candlestick,

the real body of the candlestick.

And so we have our closing is that's higher than the open and close of the red candlestick.

Everything's being engulfed in there.

We wait for the next candlestick outside of the box to kind of go some confirming, waiting for that

second bar to happen and that price bar.

And we can see, yeah, this is a trend reversal.

Look, we're going upwards now.

So this when you start seeing things like engulfing Candlestick, I think is a trend being reverse this

trend and it's the trend being reversed and wait for it to happen.

You know, the longer you wait for it, you're going to lose a little bit opportunity cost where maybe

you could have gotten a little earlier, but you're going to have less losses as far as being wrong

or a false signal.

It's really good to let these engulfing candlesticks kind of truly, you know, form a little bit and

have that second bar, the other one outside the box basically, you know, in both bars, basically

engulfing one in the one after.

It can be really good confirming patterns with engulfing candlesticks.

And they work just like a Romy's where you're looking at trend reversals.