Both the Bullish Harami and Bullish Harami Cross patterns are predominantly bullish and work if you buy long. Additionally, we have extensively tested traditional chart patterns and found they can be highly profitable. The Bullish Harami Cross reward-to-risk ratio is 1.17, the third highest of the 25 candles we tested. We have only seen better Reward/Risk ratios in our testing of “The most successful chart patterns.” Traders often use the low of the first candle in the pattern as a reference for the stop-loss point. If the price breaks below that level, it’s generally considered invalid.

Trading The Bullish Harami With Key Structural Levels

As a bullish reversal pattern, the Bullish Harami is a great pattern to watch for when the price is on an uptrend. 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. The Bullish Harami pattern needs confirmation on the subsequent candles. The Bullish Harami is more of a warning sign than a decisive reversal. It indicates that bearish momentum is slowing, but reversal confirmation from the next candle or other indicators is crucial before taking action. Bollinger Bands help you contextualize when the market is overstretched or compressed.

What is a Bullish Harami Cross?

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The same trade on a Bullish Harami is 0.50%, both reasonable returns, but the Cross is better. After conducting 5,624 trades on 1121 years of data, we confirm the superior Bullish Harami Cross profit per trade to be 0.58%. A 55.3% win rate means that trading a Bullish Harami Cross long will net you an average of 0.58% profit per trade if you sell after ten days. Conversely, short-selling a Bullish Harami Cross, you should expect to lose 0.58% per trade. A Harami candle is a two-candle pattern characterized by a long candle encompassing the following smaller candle.

This is where an indicator like the Average True Range could be useful. For instance, a tighter stop may be less effective with little volume or momentum. Let’s look at some real-world examples of the bullish harami with a few of the aspects already discussed. Assuming you have considered the factors above, now it’s time to wait for the harami to appear perfectly. It’s key to ensure that the second bullish candle is completely within the range of the first – close enough isn’t good enough.

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The first candle is a large bearish one, followed by a small bullish candle entirely within the body of the first one. A doji baby candle actually strengthens the Harami pattern because it shows even more indecision in the market. This type of formation is sometimes referred to as a “Harami Cross” and often produces stronger reversal signals.

When this occurs bullish harami candle in an uptrend, it could signal a trend reversal, up or down. Our data shows that a Harami is a reversal and a continuation pattern. The charts above show Haramis occur during uptrends and downtrends, but they do not exclusively signal a price reversal; they can also be continuation patterns. It suggests sellers are losing steam and that buyers may be starting to step in. While not a strong reversal signal on its own, it often adds confluence to the idea that the market is reversing in a given area.

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Additionally, the bullish harami has a relatively basic condition for its two candles to be considered valid. Finally, and perhaps the most potentially confusing, the bullish harami and inside bar formations can look similar or even identical in some scenarios. First, while both patterns consist of a long-ranged first candle and a short-ranged second candle, the color of these candles is of secondary importance for the inside bar. This is because what determines its “bullish” or “bearish” nature depends on its position on the chart, not the color of its candlesticks.

The pattern consists of a long candlestick followed by a smaller one, which is completely contained within the first candle’s body. Thanks to the widespread use of Japanese candlestick charts, this pattern has earned a reputation as a reliable indicator of future bullish momentum. While the this pattern indicates a potential bullish reversal, it’s not a definitive buy signal. False signals can occur, and the pattern itself might not lead to a reversal if the broader market conditions aren’t supportive. By understanding the bullish harami and other candlestick patterns, traders can gain a deeper understanding of market sentiment, which can aid in making informed trading decisions.

• Other tests show 60–70% success when confirmed with volume and context, while academic research has placed its effectiveness closer to 65%.
• The bullish trend is confirmed if the momentum-based indicators indicate an oversold level.
• It forms when sellers run out of momentum, leaving a gap Doji, after which buyers decisively reclaim control.
• Volume is perhaps one of the most fundamental technical analysis tools you can use to increase your success rate in trading.

• If the RSI is in oversold territory (typically below 30) when the pattern appears, it can hint that the selling pressure is stretched.
• The smart money move is to wait for a confirmation candle after spotting Bullish Harami.
• You can try trading the Harami candlestick pattern for free on the LiteFinance demo account.
• Thus, to effectively analyze and identify a Bullish Harami pattern, it is essential to examine the structure of the candlestick and find any confirming signals.
• It’s simple, the Bullish Harami pattern is traded when the high of the last candle is broken.
• Because of its rarity, traders often treat it as a very strong bullish reversal.

The third and final step to using the bullish harami pattern to trade in the stock market is entering the trade using the pattern signals. The confirmation candlestick which is usually the fourth or third candlestick in the bullish harami pattern is considered the best time to enter the trade. 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.

What Is The Hit Rate Of The Bullish Harami Pattern?

The next illustration is on the weekly chart of oil, which demonstrates the harami as a continuation pattern (as it’s on or near the trendline). Interestingly, there were two of these patterns on or near the latter. This shows us that trend lines can be excellent confirmation factors. Shooting Star patterns are interpreted as a bearish reversal pattern. Haramis have a large candlestick on the left and a small candle on the right. Engulfing patterns have a small candle on the left and a large candlestick on the right.

He was a Japanese rice trader who tracked price action and saw patterns developing. He published his work in The Fountain of Gold — The Three Monkey Record of Money in 1755. Here, we shall see how to spot entry, stop loss and target levels for a long position signalled by a bullish harami pattern. Its closing price is below the opening of the preceding red candle. With bulls taking charge, the trend shifts from a downtrend to an uptrend. Prices begin to reach new highs, prompting traders to consider entering a long position in the security.