CDL_HARAMICROSS (Harami Cross)

Overview

The Harami Cross is a two-candle reversal pattern where a doji appears completely within the body of the previous candle. The pattern signals potential trend exhaustion and indecision in the market, with the cross (doji) indicating a balance between buyers and sellers after a strong directional move.

Parameters

Parameter	Type	Default	Description
open	Array	Required	Array of opening prices for each period
high	Array	Required	Array of high prices for each period
low	Array	Required	Array of low prices for each period
close	Array	Required	Array of closing prices for each period

Parameter Details

Note: Array elements should be ordered from oldest to newest (chronological order)

open - Opening price for each trading period - Must be same length as high, low, and close arrays - Used to determine candle body direction and size

high - Highest price reached during each trading period - Must be same length as other price arrays - Used to identify shadow lengths

low - Lowest price reached during each trading period - Must be same length as other price arrays - Used to identify shadow lengths and doji characteristics

close - Closing price for each trading period - Must be same length as other price arrays - Used to determine candle body direction and identify doji formation

Usage

Basic Usage

require 'sqa/tai'

# Price data arrays
open  = [45.0, 48.0, 47.5, 47.6, 47.5]
high  = [45.5, 48.5, 47.8, 47.9, 48.0]
low   = [44.5, 47.5, 47.3, 47.3, 46.5]
close = [48.0, 48.2, 47.6, 47.5, 46.8]

result = SQA::TAI.cdl_haramicross(open, high, low, close)
puts "Pattern Signal: #{result.last}"

Real-Time Pattern Monitoring

# Monitor for pattern across multiple periods
result.each_with_index do |signal, index|
  case signal
  when 100
    puts "Bullish Harami Cross at period #{index}"
  when -100
    puts "Bearish Harami Cross at period #{index}"
  end
end

Understanding the Indicator

What It Measures

The Harami Cross pattern measures potential reversal points through the emergence of market indecision after a strong trend. The pattern is valuable because:

• The doji shows perfect balance between buyers and sellers
• The small doji within a large candle indicates exhaustion of the previous trend
• It signals hesitation and potential reversal before other indicators
• More reliable than regular Harami due to the doji's stronger indecision signal

Pattern Formation

The pattern requires two consecutive candles:

1. First Candle (Mother): A large candle (bullish or bearish) showing strong directional movement. This represents the prevailing trend with decisive price action.

2. Second Candle (Cross/Doji): A doji that forms completely within the real body of the first candle. The doji's open and close are nearly equal, showing indecision.

Key Characteristics: - Second candle must be a doji (open ≈ close) - Doji must be contained within first candle's real body - The larger the first candle, the more significant the pattern - Pattern can be bullish or bearish depending on first candle color

Indicator Characteristics

• Range: Returns -100 (bearish), 0 (no pattern), or +100 (bullish)
• Type: Pattern recognition, reversal indicator
• Lag: None - identifies patterns as they complete (requires two candles)
• Best Used: After extended trends, at support/resistance levels
• Reliability: Moderate; improves with confirmation
• Time Frame: Works on all time frames; daily charts most reliable

Interpretation

Signal Values

• +100 (Bullish Harami Cross):
• Bearish mother candle followed by doji
• Suggests downtrend may be ending

• Consider long positions with confirmation

• -100 (Bearish Harami Cross):

• Bullish mother candle followed by doji
• Suggests uptrend may be ending

• Consider short positions or exit longs with confirmation

• 0 (No Pattern): Pattern requirements not met

Pattern Strength Indicators

1. Mother Candle Size
2. Larger mother candle = stronger signal
3. Strong directional candle shows trend exhaustion

4. Minimum body size improves reliability

5. Doji Quality

6. Smaller doji body = stronger indecision
7. Long shadows on doji indicate volatility

8. Perfect doji (open = close) is most reliable

9. Positioning

10. Pattern at support/resistance increases reliability
11. After extended trends more significant
12. Volume confirmation strengthens signal

Context Considerations

• Location: Most effective at key support/resistance levels
• Volume: Decreasing volume on doji confirms indecision
• Market Condition: Best in trending markets
• Time Frame: Higher time frames provide more reliable signals

Trading Signals

Buy Signals (Bullish Harami Cross)

1. Pattern Confirmation
2. Large bearish candle followed by doji
3. Doji completely within mother candle's body

4. Signal value = +100

5. Entry Criteria

6. Enter on break above pattern high
7. Wait for bullish confirmation candle

8. Conservative: wait for close above mother candle open

9. Additional Confirmation

10. RSI showing oversold conditions
11. At established support level
12. Volume increase on confirmation candle

Example Scenario:

if result.last == 100 &&
   close.last > support_level &&
   rsi.last < 35

  entry = high.last
  stop_loss = low[-2] * 0.98
  target = entry + ((entry - stop_loss) * 2)

  puts "BUY Signal at #{entry}"
  puts "Stop: #{stop_loss}, Target: #{target}"
end

Sell Signals (Bearish Harami Cross)

1. Pattern Confirmation
2. Large bullish candle followed by doji
3. Doji completely within mother candle's body

4. Signal value = -100

5. Entry Criteria

6. Enter on break below pattern low
7. Wait for bearish confirmation candle

8. Conservative: wait for close below mother candle open

9. Additional Confirmation

10. RSI showing overbought conditions
11. At established resistance level
12. Volume increase on confirmation candle

Position Management

Stop Loss Placement: - Long: Below doji low or mother candle low - Short: Above doji high or mother candle high - ATR-based: 1.5-2x ATR from entry

Take Profit Targets: - First target: 1:1 reward/risk ratio - Second target: Next support/resistance level - Trailing stop: After first target hit

Best Practices

Optimal Use Cases

Market Conditions: - After extended trends (5+ candles in same direction) - At key support/resistance levels - When momentum indicators show extremes - During period of trend exhaustion

Time Frames: - Daily charts: Most reliable - 4-hour charts: Good for swing trading - Weekly charts: Stronger signals, fewer occurrences - Intraday: Less reliable, needs confirmation

Asset Classes: - Stocks: Highly effective - Forex: Works on major pairs - Commodities: Reliable on liquid contracts - Cryptocurrencies: Use with caution due to volatility

Combining with Other Indicators

With Trend Indicators: - Moving Averages: Pattern at MA provides strong support/resistance - MACD: Divergence confirms potential reversal - ADX: Low ADX suggests trend weakening

With Momentum Indicators: - RSI: Overbought/oversold confirms pattern - Stochastic: Extreme readings strengthen signal - CCI: Oversold/overbought zones add conviction

With Support/Resistance: - Fibonacci Levels: Pattern at key retracement levels - Pivot Points: Daily/weekly pivots add significance - Volume Profile: High volume nodes validate pattern

Common Pitfalls

1. Trading Without Confirmation
2. Don't enter immediately on pattern completion
3. Wait for third candle confirmation

4. Require break of pattern high/low

5. Ignoring Trend Context

6. Pattern needs preceding trend
7. Weak in ranging markets

8. Verify strong directional move before pattern

9. Poor Risk Management

10. Always use stop losses
11. Don't risk more than 2% per trade

12. Account for pattern failure

13. Volume Neglect

14. Confirm with volume analysis
15. Decreasing volume on doji is positive
16. Volume surge on confirmation validates pattern

Parameter Selection Guidelines

Short-term Trading: - Use 15-minute to 1-hour charts cautiously - Require additional confirmation - Tighter stops, smaller positions

Medium-term Trading: - 4-hour to daily charts recommended - Balance sensitivity and reliability - Hold for multiple days

Long-term Trading: - Daily to weekly charts - Fewer signals, higher reliability - Larger position sizes with confirmation

Practical Example

require 'sqa/tai'

# Historical price data
open  = [45.0, 46.0, 48.0, 49.0, 50.0, 51.0, 51.5, 51.6, 49.5]
high  = [46.5, 48.5, 49.5, 50.5, 51.5, 52.0, 51.8, 51.8, 49.8]
low   = [45.0, 45.8, 47.8, 48.8, 49.8, 50.8, 51.4, 51.4, 48.5]
close = [46.0, 48.0, 49.0, 50.0, 51.0, 51.5, 51.6, 51.5, 49.0]

# Calculate pattern
pattern = SQA::TAI.cdl_haramicross(open, high, low, close)
rsi = SQA::TAI.rsi(close, time_period: 14)

# Analyze current signal
if pattern.last == -100
  puts "BEARISH HARAMI CROSS DETECTED"
  puts "Mother Candle: O=#{open[-2]}, C=#{close[-2]}"
  puts "Doji: O=#{open[-1]}, C=#{close[-1]}"
  puts "RSI: #{rsi.last.round(2)}"

  if rsi.last > 70
    puts "Strong sell signal - RSI overbought"
    entry = close.last
    stop = high[-2] * 1.02
    target = entry - ((stop - entry) * 2)

    puts "Entry: #{entry}"
    puts "Stop: #{stop.round(2)}"
    puts "Target: #{target.round(2)}"
  end

elsif pattern.last == 100
  puts "BULLISH HARAMI CROSS DETECTED"
  puts "Mother Candle: O=#{open[-2]}, C=#{close[-2]}"
  puts "Doji: O=#{open[-1]}, C=#{close[-1]}"
  puts "RSI: #{rsi.last.round(2)}"

  if rsi.last < 30
    puts "Strong buy signal - RSI oversold"
    entry = close.last
    stop = low[-2] * 0.98
    target = entry + ((entry - stop) * 2)

    puts "Entry: #{entry}"
    puts "Stop: #{stop.round(2)}"
    puts "Target: #{target.round(2)}"
  end
end

Related Indicators

Similar Patterns

• Harami: Similar pattern without doji requirement; Harami Cross is more specific and reliable
• Doji: Single candle indecision pattern; Harami Cross adds context of prior trend
• Inside Bar: General inside candle pattern; Harami Cross requires doji specifically

Complementary Patterns

• Engulfing: Can follow Harami Cross to confirm reversal
• Piercing Pattern: Bullish confirmation after Bullish Harami Cross
• Dark Cloud Cover: Bearish confirmation after Bearish Harami Cross

Pattern Family

Harami Pattern Family: - Harami: Small candle within large candle - Harami Cross: Doji within large candle (more specific) - Both indicate potential reversals through contraction after expansion

Advanced Topics

Multi-Timeframe Analysis

# Daily pattern with 4-hour confirmation
daily_pattern = SQA::TAI.cdl_haramicross(daily_open, daily_high, daily_low, daily_close)
h4_pattern = SQA::TAI.cdl_haramicross(h4_open, h4_high, h4_low, h4_close)

if daily_pattern.last == 100 && h4_pattern.last == 100
  puts "Strong bullish signal - multiple timeframe confirmation"
end

Market Regime Adaptation

Trending Markets: - Pattern most reliable - Standard entry rules apply - Strong confirmation recommended

Ranging Markets: - Less reliable, many false signals - Require multiple confirmations - Reduce position size

High Volatility: - Wider stops needed - Doji more common, reduce significance - Confirm with volume

Statistical Validation

Historical Success Rates: - 55-60% success rate with confirmation - 40-45% without confirmation - Daily timeframe shows best results - RSI confirmation increases success to 65-70%

References

• "Japanese Candlestick Charting Techniques" by Steve Nison: Comprehensive coverage of Harami Cross pattern
• "Encyclopedia of Candlestick Charts" by Thomas Bulkowski: Statistical analysis of pattern performance
• Original Japanese Sources: Pattern from traditional Japanese candlestick analysis

See Also

• Candlestick Patterns Overview
• Harami - Similar Pattern
• Doji - Foundation Pattern
• Pattern Recognition Guide
• API Reference