In doing so, the market shows clear intent by breaking above the high of the harami before going long. Also, the 54-76% win rate is because two-bar patterns have less inherent confirmation than three-bar patterns. Finally, many consider the harami as a ‘pause signal’ instead of a pattern that can generate a key turning point on its own. This indicates greater bullish strength as sellers were unable to push the market to a low. It would have been a great confirmation candle and a great time to enter the trade. Another crucial component for when the harami has appeared is the confirmation candle/s or the candles that form afterward.
Like this harami, each of these patterns provides unique insights into market dynamics and potential future price action. However, similar to the bullish harami, these patterns should not be used in isolation. Instead, they should form part of a broader trading strategy that incorporates other indicators and risk management techniques. You’re looking for a long bearish candlestick followed by a smaller bullish candle, completely contained within the body of the first candle. Among the sequence of these patterns, the bullish harami stands out as a strong indicator of a possible shift in market momentum . Even though trading the bullish harami pattern on naked charts is effective, combining it with technical indicators can give you a clearer picture of potential market reversals.
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Strategy 2: Trading The Bullish Harami With Support Levels
Trading the Bullish Harami candlestick pattern can be a game-changer if you know how to spot and confirm it correctly. Both patterns highlight market indecision and the possibility of a change in the prevailing trend. The combination of these two candles forms the Bullish Harami, suggesting that the bearish trend might be coming to an end. So, the prices of assets might be increasing, making it a good time to go into a long position. Liberated Stock Trader, founded in 2009, is committed to providing unbiased investing education through high-quality courses and books.
- Using technical indicators along with the bullish harami candlestick pattern prevents incurring losses or limits the loss incurred.
- It auto-detects trendlines, patterns, and candlesticks, backtests ideas, and lets you use AI to create unique strategies and launch trading bots—with no code.
- Tweezer bottoms are similar to bullish haramis and feature two candlesticks with identical lows and signal a bullish reversal.
- After confirmation, it is suggested to set a stop-loss order below the Harami low to mitigate risks.
- Testimonials appearing on this website may not be representative of other clients or customers and is not a guarantee of future performance or success.
- Western technical analysts adopted it later as a classic reversal signal.
It will help you distinguish a Harami from more aggressive patterns such as Engulfing, which tend to reverse more decisively. This makes it less aggressive, but more common, and still valuable if confirmed by other tools. Read the FBS article Common Trading Chart Patterns You Should Know. Depending on the strength of the trend, different levels are more likely to work better with the Bullish Harami pattern. Here you can learn more about the different Fibonacci retracement levels. Support and resistance levels are great places to find price reversals.
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The psychology behind a Bullish Harami pattern is based on a sudden change in market sentiment. This shift suggests growing confidence in market growth and indicates a potential reversal. A small bullish candlestick that is completely overlapped by the first one After a Bullish Harami occurred on the chart, the MACD indicator started to rise in the negative zone, crossing the signal line from below.
- A bullish harami is a candlestick chart indicator suggesting that a bearish trend may be coming to end.
- The Reserve Bank of Australia (RBA) has cautioned that markets may be underestimating geopolitical and macroeconomic risks as signs of fragmentation emerge in the global financial system.
- You have the option to trade stocks instead of going the options trading route if you wish.
- Bullish Engulfing is a two-candle reversal pattern where a small bearish candle is fully “engulfed” by a larger bullish one.
Some traders also use the on-balance volume (OBV) to track whether buying or selling pressure is building in the background. If the OBV line starts turning upwards around the same time the harami appears, it can signal that volume is quietly moving in favour of buyers, even if the price hasn’t moved much yet. The first candle reflects strong selling pressure, while the next shows fading bearish momentum. Buyers step in just enough to keep the price from falling further, and the result is a small-bodied candle that doesn’t break below the previous low and closes above its open.
Margin requirements and risk level outputs designed to be replicable by customers with our Portfolio Margin Simulator. Mark leads the company’s Product Management function as Head of Product, and has held similar roles since joining the financial bullish harami candle services division in 2019. Michael joined the financial services division in early 2020 to lead the institutional sales and marketing for the crypto exchange product now known as Bullish.
Support confluence strategy
If the closing price is above the opening price, then normally a green or hollow candlestick (white with black outline) is shown. If the opening price is above the closing price then a filled (normally red or black) candlestick is drawn. Lower timeframes like 5M or 15M typically produce more noise and false signals. Use smaller positions or wait for confirmation from higher timeframes.
He has held several roles at Bullish and was most recently Senior Vice President, Global Head of Sales. Mothusi is responsible for all development at Bullish, including trading, custody, and blockchain engineering. He joined the financial services division in 2019 to help grow the engineering team for the exchange product and has held several roles at Bullish across architecture and engineering. David’s many years of investment management experience include serving as a Managing Director at Third Point LLC, a New York based investment firm.
How To Trade The Bullish Harami Candlestick Pattern
Combining the Bullish Harami with indicators like the Relative Strength Index (RSI) can enhance its effectiveness. RSI helps determine if an asset is overbought or oversold, providing additional context to the potential reversal signaled by the Bullish Harami. Combining Fibonacci retracements with the Bullish Harami pattern provides a more comprehensive view of the market, enhancing your trading strategy. For example, let’s say you’re trading a stock that has been in a downtrend, and you spot a Bullish Harami pattern forming at a key support level.
Then, the RSI rose despite the price hitting a new low (represented by the pattern’s first candle—a long-bodied bearish candle). You can incorporate the Relative Strength Index (RSI) into your candlestick charts to help assess the quality of a bullish harami candlestick pattern. Unlike other technical indicators, RSI can act as a leading indicator when it diverges from price. You can use the bullish harami candlestick pattern on bare candlestick charts with no other technical analysis tools except for the price chart itself. In this example, we can see that the bullish harami appears during the pullback phase of an ongoing bullish trend (uptrend).
However, you should always corroborate its appearance with other technical indicators before making a trading decision. A Doji, on the other hand, signifies indecision in the market as the open and close prices are very close to each other. While a Doji can indicate a potential reversal, it’s not as strong a bearish signal as the Bearish Harami. After a Bullish Harami pattern appears, it typically indicates a potential reversal of a downtrend. This means that the bearish momentum may weaken, and there could be a shift towards a bullish trend.
The Bullish Harami signal can be confirmed by other candlestick patterns. For example, if a Hammer appears after a Harami pattern, it strengthens the probability of an upcoming reversal. Furthermore, the Piercing Line, Bullish Engulfing, and Morning Star patterns may also signal a potential trend reversal.