A Bullish Harami pattern can be combined with the Fibonacci retracement levels to help traders analyze the market more precisely. Once a Bullish Harami pattern appears, plot the Fibonacci retracement levels from the end of the previous bullish impulse to the beginning of the trend. The MACD indicator can confirm the bullish signal of a Harami pattern. If the MACD line rises during the pattern formation and crosses the signal line from below, it boosts the likelihood of a market reversal.
Yes, the bullish harami pattern can appear in both uptrends and downtrends on price charts. Both the bullish harami and tweezer bottom patterns are used to signal bullish trend reversals. However, unlike the standard bullish harami where the second candle is contained within the first candle, the tweezer bottom pattern consists of two candles with identical lows. Volume is perhaps one of the most fundamental technical analysis tools you can use to increase your success rate in trading.
Morning Star Doji
Some traders prefer placing their stop below the low of the baby candle to reduce their risk per trade. However, it also increases the chances of their stops being triggered by normal market noise. Regarding the profit target, you can proceed with the previous resistance levels.
On the chart, we can see that the market could not win with the Black Candle being the first line of the Bullish Harami pattern. Waiting for that third confirmation candle can significantly improve your win rate and help you avoid dangerous false signals. Experienced traders might enter on the close of the baby candle if they have strong supporting factors, but patience usually pays off better than speed in this game. While both patterns are part of the Harami candlestick family, they signal opposite outcomes and appear in different market contexts.
Reversal Pattern Trading Strategy Explained: How to Enter, Exit and Profit
You can also use pivot points to automatically identify potential key price levels to monitor. In this illustration, we observe a bearish trend (downtrend) leading to the formation of a bullish harami pattern. By generating pivot points, we can identify the nearest suggested support level (S1) and resistance level (R1). We can then use these two levels to plan a potential long-position trade.
Trading the Bullish Harami Pattern with Technical Indicators
Trading with the bullish harami candlestick involves making trade entries following the confirmation candlesticks. The ideal trading entry position while trading with a bullish harami pattern is during the closing hours of the third confirmation candlestick of the bullish harami. The entry positions are made above the high of the second candlestick of the harami pattern to gain maximum profits and stop losses can be used to prevent losses. The bullish harami pattern often forms when a downtrend or pullback phase is “exhausted”—meaning the bearish momentum driving prices lower is losing steam. Because the bullish harami pattern’s second candle is often much smaller, it typically allows for a close cut-loss point relative to your entry. This setup enables a low-risk play, compensating for the pattern’s lower success rate than similar candlestick patterns (which will be discussed in the disadvantages section).
What is the Success Rate of the Bullish Harami Candlestick Pattern?
- The same trade on a Bullish Harami is 0.50%, both reasonable returns, but the Cross is better.
- Unsurprisingly, everything about the former is identical to the latter, except for being directed in the opposite direction.
- All three main advantages of the bullish harami pattern are listed below.
- The image shows that the third candlestick of the pattern is a bullish candlestick confirming the trend reversal.
- Instead, it should be part of a comprehensive trading strategy that includes other technical indicators, sound risk management, and a deep understanding of the financial markets.
Ideally, to increase the accuracy, we want to trade the Bullish Harami candlestick pattern by combining it with other types of technical analysis or indicators. To trade the Bullish Harami candlestick pattern it’s not enough to simply find a pattern with the same shape on your charts. The figure presents that the biggest “problem” of the harami patterns is their first candle.
Then, suddenly, it was gapped up by a smaller bullish candlestick. Yet, while the pattern seemed promising as it was also followed by a long bullish candlestick, it abruptly lost momentum and now moves sideways with no clear trend direction. This serves as a reminder that the market can move unpredictably, and we cannot perfectly forecast where the price will go, making proper trade management essential.
What is a Bullish Harami Pattern?
Being an easy pattern to both identify and understand, this pattern is highly useful to beginners as well as advanced traders. The trend reversal that the bullish harami signals is simple and can be understood by all. 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.
These may include indicators and chart patterns to confirm valid trades. Yes, the bullish harami candlestick pattern is reliable in technical analysis as long as it is used with other momentum-based technical indicators like the MACD or the RSI. A bullish harami candlestick is a price chart formation that signals bullish trend reversals. A bullish harami candlestick comprises two candlesticks including a long bearish candlestick and a short bullish candlestick. The name ‘harami’ traces its origin to the Japanese language where ‘harami’ means ‘pregnant’.
This example illustrates how the pattern can work when all conditions align properly. In September 2024, Tesla’s daily chart displayed a textbook harami bullish harami candle cross pattern that demonstrated why variation matters in pattern recognition. The formation occurred with a wide bearish candle followed by a doji-like second candle that closely resembled perfect indecision. The bullish harami isn’t just a technical pattern—it’s a window into the collective soul of market participants at the moment they change their minds about an asset’s direction. I’ve ranked and reviewed every candlestick pattern, including the best double candlestick patterns. The stock price is downtrending as it’s below the 50-day moving average.
Traders see it as validation that the uptrend is resilient and that bearish attempts were quickly neutralized. It is considered especially effective when paired with high volume or strong momentum. LiberatedStockTrader’s backtesting reports ~56–58% success for Belt Hold patterns.
- ” Fun fact, the term “Harami” is derived from an old Japanese word meaning “pregnant,” and it’s quite fitting when you see how the pattern looks on the chart.
- Western analysts adopted it later as a higher-reliability reversal compared to simpler patterns.
- This indicates that sellers have overextended themselves, and the market is rejecting lower prices.
- The image above shows that the bullish harami candlestick pattern looks like a pregnant woman who is carrying a child in her womb.
- The bullish harami candlestick pattern signals that the bulls are gaining control of the market and that asset prices are on the rise.
- The third or fourth candlestick is considered a bullish harami confirmation candlestick only if it closes above the prior bullish candlestick.
Traders see the Morning Star as a strong indicator of bottom formation, especially when it forms near support or after a prolonged decline. Its three-stage nature makes it more dependable than simpler candlestick patterns. Morning Star is a three-candle bullish reversal pattern that starts with a long bearish candle, followed by a small-bodied indecision candle, and ends with a strong bullish candle. Morning Star indicates exhaustion of selling pressure and the start of a potential upward move. Bullish Counterattack patterns generally have about a 56% success rate in predicting reversals.
What are other Types of Candlestick besides Bullish Harami?
Reversals capture bottoms, while continuations ride existing momentum. Charts visually confirm these entries, making execution disciplined. Without strict stop-loss rules, even strong patterns turn into losses during false reversals. Traders interpret it as a sign of capitulation—where sellers are drained of strength and buyers reclaim dominance.
The third candle validates the reversal, showing buyers are fully in control. The Abandoned Baby has been recognized in Japanese candlestick teaching for centuries. It became prominent in Western technical analysis in the 1990s as a highly reliable gap-based pattern. It forms when sellers run out of momentum, leaving a gap Doji, after which buyers decisively reclaim control. The dual gap structure makes it one of the strongest reversal signals.
Prices start at only $10, and you can see more detailed statistics, for other markets and periodicity. The market context in which a Bullish Harami is being developed is more important than the candles’ bodies or shadows length. The Bullish Harami is a two-line pattern which the black candle’s body of the first line engulfs the white candle’s body of the second line. Don’t just read the charts, trade them with smart money strategies, AI analysis, and real-time alerts. Check out our plethora of Volume & Volatility indicators (both free and premium) to uplift your trading game.
