How to Use Bullish and Bearish Harami Candles to Find Trend Reversals

The Bullish Harami pattern is also a mirrored version of the Bearish Harami candlestick pattern. We introduce people to the world of trading currencies, both fiat and crypto, through our non-drowsy educational content and tools. We’re also a community of traders that support each other on our daily trading journey. The Harami is a trend reversal pattern and must appear in an existing trend. The first candlestick is seen as the “mother” with a large real body that completely enclosing or embodies the smaller second candlestick, creating the appearance of a pregnant mother.

The risk-taker will initiate the trade on day 2, near the closing price of 125. The risk-averse will initiate the trade on the day after P2, only after ensuring it forms a red candle day. In the above example, the risk-averse would have avoided the trade completely.

Bullish Harami

All ranks are out of 103 candlestick patterns with the top performer ranking 1. “Best” means the highest rated of the four combinations of bull/bear market, up/down breakouts. Still, identifying the candlestick pattern is not always a guarantee that the reversal pattern will happen.

• Market volatility, volume and system availability may delay account access and trade executions.
• It’s worth noting that the second candle will technically gap inside the first.
• Harami candles are a type of candlestick pattern that can be used to predict future price movements in the market.

The MACD crossover, on the other hand, occurs even before the pattern occurs which provides a strong indication that the momentum of the bearish trend is over. The only difference is that the bearish harami pattern appears at the end of an uptrend and has the opposite outcome that the bullish harami setup. Analysts looking for fast ways to analyze daily market performance data will rely on patterns in candlestick charts to expedite understanding and decision-making. Each day our team does live streaming where we focus on real-time group mentoring, coaching, and stock training.

Mastering the Trading Floor: 8 Expert Eye-Opening Insights

My book,

Encyclopedia of Candlestick Charts,

pictured on the left, takes an in-depth look at candlesticks, including performance statistics. Second, you should then look closely at the movement of the candlesticks and identify when a large candlestick is followed by a small candle. For the pattern to happen, the smaller candle must be completely engulfed by a larger one. Unlock our free video lessons and you will learn the exact chart patterns you need to know to find opportunities in the markets. In the chart below, we have drawn Fibonacci retracement levels from the highest to lowest prices of the previous trend.

A bullish harami is a candlestick reversal pattern that appears at the bottom of a downtrend in an asset price. A bearish candle with a long body precedes a bullish candle with a small body- the latter encompassed within the body of the preceding candle. One of the main advantages of the harami candlestick pattern is that it’s easy to identify. This pattern has somewhat clear and distinctive elements that make harami easily recognizable. Another advantage is that this pattern often occurs at the reversal points where traders can achieve impressive results. To understand the harami patterns, you must have a good idea about the Japanese candlestick chart structure.

Harami Candlestick Pattern

Bullish and bearish haramis are among a handful of basic candlestick patterns, including bullish and bearish crosses, evening stars, rising threes, and engulfing patterns. A deeper analysis provides insight using more advanced candlestick patterns, including island reversal, hook reversal, and san-ku or three gaps patterns. The bullish harami candlestick formation is a trend reversal pattern that occurs at the end of a downward trend and signals a buying opportunity. In other words, the bullish harami candlesticks pattern has a large bearish candle engulfing a small bullish candle.

The bullish harami indicator is charted as a long candlestick followed by a smaller body, referred to as a doji, that is completely contained within the vertical range of the previous body. To some, a line drawn around this pattern resembles a pregnant woman. The word harami comes from an old Japanese word meaning pregnant. The potency of the pattern is determined by the size of the second candle; the smaller it is, the more likely a reversal will occur.

If you drew an outline of the pattern, it looks like a pregnant woman. We can try to understand the harami pattern taking the example of a month-long trading period. Initially, the market is on a downward spree due to which prices crash lower and lower, making the markets bearish. The next day opens at US$4 and closes at US$5 (less than the opening price for the previous day), thus forming a blue candle.

Free Trading Courses

Candlestick chart analysis are one of the most popular types of technical analysis because they allow traders to evaluate price data using only a few price bars quickly. TheBullish Harami Cross and all of the above patterns may be identified with our candlestick pattern indicator for NinjaTrader 8. Check out the LizardIndicators Premium Section for more information. A smaller body on the following Doji must close higher within the body of the previous day’s candle to form a bullish harami, indicating a larger possibility of a reversal. It’s a reversal pattern because before the Bullish Harami appears we want to see the price going down, thus it’s also a frequent signal of the end of a trend.

• Either way, just like with any other market indicator, it’s better not to use the harami pattern alone.
• Many traders have heard about the harami pattern, but few actually know how to trade it.
• Open your trading account and deposit a minimum of $50 to receive your complementary access now.
• A bullish harami is a candlestick reversal pattern that appears at the bottom of a downtrend in an asset price.
• In this post, we will describe the bullish harami pattern in general, and then we will show you how to identify the right entry-level to trade this pattern.

Past performance of a security or strategy is no guarantee of future results or investing success. Trading stocks, options, futures and forex involves speculation, and the risk of loss can be substantial. Clients must consider all relevant risk factors, including their own personal financial situation, before trading. Trading foreign exchange on margin carries a high level of risk, as well as its own unique risk factors. Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses.

Bullish Harami Candlestick Pattern

TD Ameritrade does not make recommendations or determine the suitability of any security, strategy or course of action for you through your use of our trading tools. Any investment decision you make in your bullish harami candle self-directed account is solely your responsibility. Our aim is to make our content provide you with a positive ROI from the get-go, without handing over any money for another overpriced course ever again.

Several traders attach more importance to the Harami cross candle pattern compared to the regular Harami pattern. Just like the normal Harami patterns, there are also two types of Harami cross patterns–Bullish and Bearish. If you want a few bones from my Encyclopedia of candlestick charts book, here are three to chew on. Nonetheless, when you are able to find the boundaries of the previous trend, Fibonacci support and resistance levels can help you confirm the trend reversal and find the right entry level. We don’t care what your motivation is to get training in the stock market.

Psychology behind harami candlestick pattern

Since this formation gives a reversal signal, it may be a good time to enter a long position. As always you should look for confirmation instead of assuming a reversal is happening. News, earnings, greed and fear can change the direction of a stock within a matter of seconds. A large red candle appears one day, indicating that the sellers have complete control. If we are in a downtrend, then we are looking for a reversal pattern. We can tell this because the first candlestick of the pattern is a large-bodied candlestick, which suggests a large volume of trading has occurred in that session.

The vertical borders of the body stand for the open and the close prices. If the open price is lower than the close price, the candle is green, and vice versa. In this example, we are using a downtrend to emphasise the bullish reversal pattern. It is one of the most popular trading patterns in forex, and it has been used by a lot of traders to make money in the markets. As a bullish reversal pattern, the Bullish Harami is a great pattern to watch for when the price is on an uptrend.

We are sharing premium-grade trading knowledge to help you unlock your trading potential for free. That is why they are great for traders new to this and I highly recommend every trader be on the lookout for them on their chart scans. Instead of the second candlestick is completely within the first, you will find that it is more often matching the close of the first candlestick only. The above example is what you’d expect to see in most markets, but if you are trading forex, there is a slight difference.