The bearish harami candlesticks pattern signals with high probability, a bearish reversal. In order to be reliable, an uptrend must be in place. We can have any combination of colors in both candlesticks, although the most bearish pattern occurs when they are both red or the first is red and the second is green. The same principles can be applied to the bearish harami cross pattern. Below follows their graphical representation.
After a steep price advance a red long bodied candlestick appears, which is a sign that sellers are coming into play. The second candlestick represents a period of consolidation and indecision among market participants, before the trend finally reverses and becomes a downtrend.
Trading set up using bearish harami
In WLP daily chart (below) we can see a bearish harami candlesticks pattern in the circled area, which is formed above a resistance. Sometimes when the move is very powerful it can temporarily breach a resistance or support level before reversing back. Notice here that the pattern is formed by a green long candlestick and a short red. Also the possibility of success is augmented if the market has also formed a bearish candlesticks pattern on a resistance level or even better being simultaneously in a midterm downtrend.
In this trade if someone was entering the trade according to the reversal strategy rules but without waiting for confirmation from a candlestick pattern, he/she would have stopped out. Both ways of entering a trade are acceptable, with confirmation from candlesticks patterns or without and they depend mostly on the risk profile and risk management of the individual trader. Small and manageable losses from unsuccessful trades are a part that every trader has to accept irrelevantly of the strategy he/she implements.