Harami Candlestick Pattern

Harami is one of the important candlestick patterns that warn of a potential trend reversal in the market. It is a two stick pattern meaning it takes two days for the Harami pattern to form. Harami is the Japanese for a pregnant woman. This pattern looks like a pregnant woman.

In case of the bullish harami, the first day is a bearish candle that occurs in a downtrend. On the second day, bulls enter the market and start moving the prices higher but not with much success as the price close lower than the open of the first day and the first day's high is not surpassed. However, when this pattern appears it culminates in a trend reversal.

How do you identify a bullish harami pattern? The setup day candle should be larger than the signal day candle. The setup day candle should be bearish whereas the signal day candle should be bullish.

The open on the signal day should be higher than the close of the candle on the setup day. The signal day candle should have a close higher than the open.

This is an important pattern that tells of a potential trend reversal. It has an important variation that is called the Harami Cross that has a Doji forming on the signal day.

When this pattern appears and you want to trade it, you can use the close of the setup day as your stop loss. Sometimes, using too tight a stop might get you out of a successful trade. However, putting a stop loss with enough room can keep you in a bad trade too long. Where to place the stop loss is an art plus a science and it is one of the most difficult parts of trading.


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