The start of trading at higher levels on September 9 indicated the formation of a bear trap — a signal that increases the chances of a reversal from the bottom. ✓   the bullish harami suggests that the trend will shift to an upward movement;   ✓   the bearish harami indicates that prices may move downward. The Harami never appears randomly – it specifically materializes as a potential reversal signal within an ongoing trend.

Understanding Change of Character (ChoCh) in Trading

This trade brought us a profit of $.77 cents per share in less than an hour. The preceding candle tends to be very large in relation to the other candles around it. Information in this article cannot be perceived as a call for investing or buying/selling of any asset on the exchange.

Harami are a type of candlestick pattern that signals a potential reversal. While not a guarantee, their appearance may indicate that market conditions are changing. A harami pattern is a 2-candlestick formation that may signal a reversal.

How To Spot Harami Candlestick Pattern?

Analyzing volume data with professional footprint charts can provide valuable insight. Now, you can test (and/or stretch) the criteria we mentioned above to find the most tradeable opportunities. For example, you may find that harami that feature a hammer-shaped candle perform more reliably. This sets the stage for reversal, as counter-trend pressure appears to be mounting. A Bearish Harami’s first candle indicates that the current uptrend is continuing and the bulls are pushing the price higher. Usually, the second candlestick will be the opposite color of the first candlestick, but not always.

The bearish Harami works effectively across virtually all financial markets – stocks, forex, commodities, and cryptocurrencies – making it a versatile tool in any trader’s arsenal. The initial candle must be substantial and align with the prevailing trend – a prominent green candle during upward movement or a significant red candle during downward movement. This often represents the trend’s final surge before momentum depletion. In a downtrend, it means that sellers have failed to close the second candlestick near the low of the previous candlestick.

Is the bullish harami pattern reliable?

• 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.
• This highlights the importance of using footprint charts and other volume analysis tools as the main resources for making well-informed trading decisions, rather than just supplementary tools.
• You’ll want to analyze both within the context of greater chart patterns as well as trend and price levels.
• A logical stop loss is below the low of the Doji candle or the first bearish candle to minimize risk.
• Of course, there are other candlestick patterns that you should learn about.

Investors and traders use this distinct shape of the pattern to identify the bullish harami pattern on price charts. The second candlestick in a bullish harami pattern is also sometimes a doji candlestick. A doji is a special candlestick pattern in which the open and close price of the security is practically equal, giving the candlestick just a horizontal line for a body.

How to Trade Harami Candlestick Pattern with Dukascopy

The main disadvantage of the bullish harami candlestick is the need to wait for the trend reversal confirmation. The bullish trend is confirmed if the momentum-based indicators indicate an oversold level. The image above shows that the confirmation candlestick closes above the second candlestick of the pattern. The trend is assumed to continue once the confirmation candlestick confirms the trend reversal. Investors and traders can also use other momentum-based indicators such as the MACD or RSI to confirm the predictions made by the bullish harami patterns. The third step for investors and traders is to confirm the trend that the bullish harami indicates.

What is an example of a Bullish Harami Candlestick Pattern used in Trading?

• The image above shows that the bullish harami candlestick pattern looks like a pregnant woman who is carrying a child in her womb.
• The image above shows an initial market downtrend as represented by the black downward arrow.
• Investors looking to identify harami patterns must first look for daily market performance reported in candlestick charts.
• Information in this article cannot be perceived as a call for investing or buying/selling of any asset on the exchange.

Generally, you can put more weight into multi-stick patterns than single candles. Still, it is considered unwise to trade based on candlestick patterns alone. The bearish Harami often appears at the early stages of a trend reversal, giving traders a head start before a significant price decline occurs. This early signal can be invaluable for timing exits or establishing short positions. Like all candlestick patterns, the bullish Harami can generate misleading signals, particularly in choppy markets or during periods of low volatility. As seen in the GBP/USD 30-min chart, the RSI crossover occurs exactly at the same time when the bullish harami appears and is above the 30 level.

Investors and traders must aim to enter the trade just before the confirmation candlestick closes to maximize their returns. Investors and traders also commonly use stop losses to prevent losing a large sum of money. A stop-loss order is a pre-decided order that states that a security can be either bought or sold when it reaches a certain price known as the stop price. While trading using the bullish harami candlestick pattern, a stop loss must be placed below the low of the first bearish candlestick. There are more than 40 types of candlesticks including bullish candlestick patterns, bearish candlestick patterns and continuation candlestick patterns.

We’re also a community of traders that support each other on our daily trading journey. In an uptrend, it means that buyers have failed to follow up on the surge of activity and close the second candlestick at or near the high of the previous candlestick. Watch this video to learn more about how to identify and trade the bullish harm pattern. A new drop to the 38.2% Fibonacci level appears (the bottom of the green shaded area). However, the blue lines at the end of the chart show how the price confirms a double bottom pattern. The double bottom is an early indication that price is likely to stabilize and lead to a potential rally.

Within the orange lines, you will see a consolidation, which looks like a bearish pennant. Suddenly, Facebook’s price breaks the pennant to the downside and thus we continue to hold our short position. On the chart, you will see many colorful lines illustrating different price action patterns. The double top that came in the form of a bearish engulfing candlestick gave us that added confirmation that we really did see a top of some sort. Once you install the platform, you will automatically get the free harami candlestick START plan, which includes cryptocurrency trading and basic features. You can use this plan for as long as you like before deciding to upgrade to a more advanced plan for additional ATAS tools.

The Bullish Harami Chart Pattern with Fibonacci Retracements

It is made up of a long candle moving in the direction of current trend followed by a small candle moving in the opposite direction. The trading range of the second candle must be completely contained within that of the first. Since candlesticks are the basic building block of most technical analysis, the ability to recognize different candlestick patterns is a crucial trading skill. For confirmation, use Dukascopy’s extensive indicator library to add supporting evidence. Consider pairing the Harami with RSI readings (oversold for bullish Harami, overbought for bearish Harami), volume analysis, or key support/resistance levels.

The best approach is to use cluster charts, which offer rich insights and allow you to decode the market signals hidden within the harami candles. The Harami Cross (Bullish) pattern is a valuable tool for traders seeking to spot early trend reversals during downtrends. By combining it with confirmation candles, trend analysis, indicators like RSI, support/resistance zones, and proper risk management, you can create robust trading strategies. The Harami Cross (Bullish) pattern is a powerful and reliable candlestick formation in technical analysis that signals a potential reversal from a downtrend to an uptrend.