As the market is in a downtrend, market participants are mostly bearish. Sellers are dominating the market, and buyers wait for a signal that the bearish trend has come to an end. The first candlestick is referred to as the “mother” with a large real body that embodies the smaller second candlestick, thus creating the visual of a pregnant mother. In this trading strategy, we will combine the harami with bollinger bands.

Powerful Continuation Candlestick Patterns

There are more than 40 types of candlesticks including bullish candlestick patterns, bearish candlestick patterns and continuation candlestick patterns. The image above shows an initial market downtrend as represented by the black downward arrow. The image shows the bullish harami pattern with the two candlesticks including the long bearish candle and short bullish candlestick following it.

What Is a Harami Candle? Example Charts Help You Interpret Trend Reversal

Firstly, a bullish harami candlestick is a bullish trend reversal indicator whereas the shooting star is a bearish trend reversal indicator. Secondly, the bullish harami candlestick pattern is made up of two candlesticks while the shooting star pattern consists of a single candlestick. The first step to using the bullish harami pattern to trade in the stock market is confirming the pattern on the stock price chart. The third or fourth candlestick in a bullish harami pattern usually confirms the upcoming bullish trend.

Bullish Harami, Bearish Harami, and Advanced Candlestick Patterns

A possible place to enter the long is when the price moves above the open of the first candle. The Harami pattern is a two-candlestick formation found in financial markets to signify a possible change in trend. Derived from a Japanese word meaning ‘pregnant’, it symbolizes the potential birth of a new trend. The pattern emerges over two trading sessions and can be indicative of both bullish and bearish reversals depending on the preceding trend and the pattern’s composition. The bullish harami candlestick exhibits nearly random behavior, with reversals having a 53% to 47% advantage over continuations.

Trading the Harami Candlestick Pattern — The Full Guide.

A bearish harami is a two bar Japanese candlestick pattern that suggests prices may soon reverse to the downside. The pattern consists of a long white candle followed by a small black candle. The opening and closing prices of the second candle must be contained within the body of the first candle. A big down candle followed by a doji indicates a bullish harami cross.

If it does, there is a greater chance of a larger price move to the upside, especially if there is no nearby resistance overhead. Recognizing Harami patterns can inform traders about a possible change in market sentiment. A bullish Harami occurs after a downtrend and suggests that the selling pressure is diminishing and a reversal upwards may be forthcoming.

One possible place to enter the trade is when the price drops below the first candle open. We can see in the chart how after the pattern formation, the prices have gapped down confirming the reversal signaled by this pattern. In the daily chart of USD/INR, we can see a Bearish Harami formed at the end of the uptrend. One should rely on the chart patterns, candle patterns, support and resistance, and so on. One should note that the important aspect of the bearish Harami candlestick is that prices gapped down on Day 2, and also, they were unable to move higher back to the close of Day 1. Like the engulfing pattern, this pattern also consists of two candlesticks but with the first candlestick being a large candlestick and the second being a smaller candlestick.

ADX is one of our favorite indicators that we’ve found to work very well with many trading strategies. When the first candle of the bullish harami is formed, there is no sign of bullish market sentiment. Just as before, selling pressure is high and pushes the market even lower.

The Harami candlestick pattern is recognized for its predictive capabilities in technical analysis, often signaling potential trend reversals. In both instances the candle labelled ‘3’ designates the confirmation candle which approves the pattern. With most candlestick patterns, traders can utilise other technical indicators to support the pattern. If the next candlestick is also a bullish candlestick, then this is a confirmation that the market has indeed reversed and is now moving in an uptrend. On the other hand, if the next candlestick is a bearish candlestick, then this is a confirmation that the market has indeed reversed and is now moving in a downtrend. Once you have identified a potential harami candlestick pattern, you will want to wait for the market to confirm the reversal.

This pattern consists of two candlesticks, with the first being a large candle and the second a smaller one that is fully contained within the vertical range of the previous candle’s body. It is this containment that gives the Harami its name, which means ‘pregnant’ in Japanese, referring to the appearance of a mother candle with a smaller baby candle inside. Investors looking to identify harami patterns must first look for daily market performance reported in candlestick charts. This pattern is considered bearish because it indicates that the bulls have lost control and the bears are beginning to take over. While the bearish harami is not as reliable as some other candlestick patterns, it can still be a useful tool for identifying potential reversals in an uptrend. The first candlestick is a long up candle (typically colored white or green) which shows buyers are in control.

All the advantages primarily revolve around the ease of spotting and identifying the bullish harami candlestick. Its distinctive shape which resembles a pregnant woman aids in its quick identification. All three main advantages of the bullish harami pattern are listed below. Yes, it is possible to improve the accuracy of bullish harami patterns. The accuracy of the bullish harami patterns can be improved using other technical indicators with them.

The confirmation candlestick in a bullish harami is a bullish candlestick that closes above the prior bullish candlestick. The image below shows a trend confirming candlestick in a bullish harami pattern. The confirmation of trend reversal in a bullish harami pattern occurs in the third or fourth candlestick that follows the harami pattern.

1. The trend reversal that the bullish harami signals is simple and can be understood by all.
2. This provided confirmation and an opportunity to exit longs or enter short positions.
3. The entire body of the second candlestick must lie within the body of the prior bearish candlestick for the pattern to be a bullish harami formation.
4. The first candlestick is referred to as the “mother” with a large real body that embodies the smaller second candlestick, thus creating the visual of a pregnant mother.
5. One should only trade the haramis, which form when the price touches a level of the upper or lower Bollinger bands.

In this article, we’ve had a look at the bullish harami candlestick pattern. We’ve explored its meaning, and showed you how you could improve the pattern by using different filters. In addition to that, we’ve also covered a couple of example trading strategies. For a bearish harami cross, some traders prefer waiting for the price to move lower following the pattern before acting on it. In addition, the pattern may be more significant if occurs near a major resistance level.

The two main disadvantages of the bullish harami include the need for trend confirmation while using it and its inability to be used in isolation. Other commonly used candlestick patterns include spinning top, shooting star, hammer, hanging man, and evening star. Another key advantage of the bullish harami candlestick pattern is its comprehensibility. Being an easy pattern to both identify and understand, this pattern is highly useful to beginners as well as advanced traders.

This is followed by a doji, which shows indecision on the part of the buyers. Once again, the doji must be contained within the real body of the prior candle. The bearish harami is a bearish reversal pattern that’s believed to signal a negative trend reversal. A bearish harami consists of two candles, where the first is bullish, and followed by a bearish candle which body is confined within the range of the previous candle. Other advantages of the bullish harami pattern include its ability to combine well with simple momentum-based technical indicators such as the MACD and the RSI.

The reliability of the Harami pattern becomes greater when it is accompanied by other technical indicators, such as volume or moving averages. It is vital for investors to consider the bigger picture and confirm the pattern with additional analysis to make more informed trading decisions. However, as with all technical patterns, the Harami is not a guarantee of a trend reversal and should be used in the context of other supportive data. Traders typically combine other technical indicators with a bearish harami to increase the effectiveness of its use as a trading signal. For, example, a trader may use a 200-day moving average to ensure the market is in a long-term downtrend and take a short position when a bearish harami forms during a retracement.

Conversely, if the candles leading up to the pattern are small and insignificant compared to other candles, that’s a sign that the trend is weak and might break more easily. During the rest of the day selling pressure tries to push the market lower, but buyers are there each time to prevent the market from heading lower. The bulls even manage to push prices a little higher, albeit not above the open of the previous bar. A bearish harami received its name because it resembles the appearance of a pregnant woman. This means without any indicators, oscillators or moving averages, etc. Although the stochastics are one of the faster oscillators, it might take forever until you match your candle pattern with an overbought/oversold signal.

The image shows that the first candlestick in a bullish harami pattern is a long bearish candlestick and the second is a short bullish candlestick. The entire body of the bullish candlestick must fall inside the body of the bearish candlestick. The second bullish candlestick must make a jump from the low of the previous bearish candlestick to open at a higher position. The candlestick pattern is considered a bullish harami if it fulfils these conditions.

Bullish Harami patterns can have either short or long tails, and are considered more reliable when found in an oversold market. While not all reversals will result in significant price movements, traders will often use this pattern as an indication to enter into long positions. Continuation candlestick patterns are those that represent the continuation of the existing active trend.

Investors and traders usually use the bullish harami candlestick pattern with technical indicators like the MACD and RSI to cross-check and confirm the signals the harami pattern produces. Using technical indicators along with the bullish harami candlestick pattern prevents incurring losses or limits the loss incurred. The bullish trend is confirmed if the momentum-based indicators indicate an oversold level.

That would suggest that more market participants took part in forming the pattern, which increases its significance. Now, most traders who make use of the bullish harami add other conditions and filters to improve the accuracy of the pattern. In short, patterns like the bullish harami should be seen as small indications harami candle of where the price is headed next that need to be validated with other methods as well. Typically, traders don’t act on the pattern unless the price follows through to the upside within the next couple of candles. Sometimes the price may pause for a few candles after the doji, and then rise or fall.

Analysts looking for fast ways to analyze daily market performance data will rely on patterns in candlestick charts to expedite understanding and decision-making. When traders interpret the Harami candles, context is vitally important. Analysing the previous charting pattern (trends) as well as price action will give the trader greater insight and ability to forecast the implications of the Harami pattern.

Examples of continuation candlestick patterns include doji, spinning top, high wave, falling window, rising three methods, falling three methods etc. In this article, we’re going to have a closer look at the bullish harami pattern. We’re going to cover its meaning, how you can improve its accuracy, and provide some examples of trading strategies that rely on the bullish harami pattern. The Harami pattern can indicate a potential reversal or pause in the market trend, providing traders with entry and exit signals. Below are specific strategies to capitalize on this pattern, accompanied by risk management techniques.

Let’s take a look at a simple example that a day trader could have profited handsomely off of. It is characterized by having a very small real body almost to the point of being a doji. A bearish Harami occurs at the top of an uptrend when there is a large bullish green candle on Day 1 followed by a smaller bearish or bullish candle on Day 2. With this strategy example, we wanted to show the possibilities of using volume to improve on the accuracy of the pattern. In fact, we’ll be using a type of volume pattern on top of the bearish harami. While the candlestick chart tells you how the market has moved, it doesn’t give a clear indication of the conviction of the market.

The second main disadvantage of the bullish harami pattern is that it is not advisable to use this pattern in isolation. The bullish harami pattern can give false positive signals sometimes which could lead to losses if not used along with other technical indicators. One of the main advantages of the bullish harami pattern is the ease of spotting it on a price chart. Investors and traders can easily identify the bullish harami pattern on a price chart using its unique shape that resembles a pregnant woman.

The forex charts below exhibit both types of Harami patterns and how they feature within the forex market. The Harami Candlestick Pattern is considered a trend reversal pattern that can either be bullish or bearish, depending on the direction of the price action. Typically, you shouldn’t trade a pattern without having some sort of confirmation. You need to add some sort of filter or additional condition to ensure that you have a real edge. It’s also important to ensure that you take trades on a market and timeframe where the pattern works.

The image below shows an example of a bullish harami candlestick pattern used in trading. A bullish harami is a two-candle bullish reversal pattern that forms after a downtrend. The first candle is bearish, and is followed by a small bullish candle that’s contained within the real body of the previous candle. Harami candlestick patterns are a type of reversal pattern, where there are bullish and bearish equivalents. If the second candle is a doji, this pattern is classified as a harami cross.

The opposite pattern to a bearish harami is a bullish harami, which is preceded by a downtrend and suggests prices may reverse to the upside. All four strategies are great for trading candlestick reversal patterns like the harami. Yet, according to our in-house trading expert Al Hill, if he had to pick a strategy, he’d prefer trading haramis with bollinger bands.

Without context, the Harami is just three candles which are practically insignificant. A bullish Harami occurs at the bottom of a downtrend when there is a large bearish red candle on Day 1 followed by a smaller bearish or bullish candle on Day 2. If we demand that the market should be overbought before we take a trade, we just have to say that it has to be above the upper Bollinger band.

He has a vast knowledge in technical analysis, financial market education, product management, risk assessment, derivatives trading & market Research. All in all, the bullish harami pattern is a sign that bulls managed to not only make the market gap to the upside, but also hold that level for the rest of the day. In analyzing the Harami candlestick pattern, traders consider its appearance as a possible indication of a future reversal. However, accurate interpretation relies heavily on context and further price confirmation.

Just note that the strategies presented aren’t meant for live trading, but to serve as inspiration for your own strategy building. When the first bullish candle of the pattern forms, market sentiment is bullish. It’s believed that the market is headed higher, and buying pressure dictates the movements of the market. The frequency rank of twenty-five implies that the pattern appears frequently enough to be spotted easily on price charts.

The bands themselves adapt to the volatility level, which means that we demand more from a highly volatile market than one that’s less volatile. There are two types of Harami candlestick patterns – the Bearish Harami pattern and the Bullish Harami pattern. Arjun is a seasoned stock market content expert with over 7 years of experience in stock market, technical & fundamental analysis. Arjun is an active stock market investor with his in-depth stock market analysis knowledge. Arjun is also an certified stock market researcher from Indiacharts, mentored by Rohit Srivastava. To ensure that we only take a bullish harami when volatility is high, we’ll use the ADX indicator.

The bullish harami is considered an accurate indicator of trend reversals when used along with other technical indicators. The reliability and accuracy of the bullish harami pattern are not dependable when it is used in isolation as there are chances of false positives. The image shows that the third candlestick of the pattern is a bullish candlestick confirming the trend reversal. The third or fourth candlestick is considered a bullish harami confirmation candlestick only if it closes above the prior bullish candlestick. The following chart shows a bearish harami cross in American Airlines Group Inc. (AAL). The price had been falling in an overall downtrend, but then flattened out into a large range.

Reversal signals are often stronger at significant price levels (support, resistance, highs and lows). If you have read about the bearish engulfing pattern you might have realized that it’s actually quite similar to the bearish harami. Secondly, investors and traders must spot the two candlestick pattern formation that satisfies the conditions of the bullish harami. The image below shows what investors and traders need to look out for while spotting a bullish harami.