Also, it is important to pay attention to volume, as an increase in volume when the price breaks above the pattern can confirm a reversal. Another important indicator is the Fibonacci retracement, which can help identify key levels of support. Here, we shall see how to spot entry, stop loss and target levels for a long position signalled by a bullish harami pattern.

Neutral Doji Candlestick Pattern: Backtest Findings

For a cluster chart analyst, this test could have provided a long entry setup with the same profit target but significantly lower risk. Another thing you can see is that the two candles have an upper and lower shadow. Additionally, the harami candles have a close resemblance to an engulfing candle. The only difference is that in an engulfing, the smaller candle is usually followed by the bigger candle. Once the pattern is identified, traders will wait for a break of the pattern’s high and then enter short when the price falls below that high, setting a stop loss of one ATR.

Trading The Bullish Harami Pattern with Relative Strength Index (RSI) Indicator

If the price has been in a clear downtrend, especially one that has been in place for a long period, a bullish harami’s meaning is more significant. Still, identifying the candlestick pattern is not always a guarantee that the reversal pattern will happen. Therefore, we recommend that you wait for a while before you enter a trade.

False signals

The bullish trend is confirmed if the momentum-based indicators indicate an oversold level. The success rate of the bullish harami candlestick pattern is approximately around 53%. It is because of the success rate of 53% that it is advisable to act on the bullish harami signal after confirming with other technical indicators such as the MACD or the RSI. Yes, it is possible to improve the accuracy of bullish harami patterns.

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. Combining this candlestick pattern with indicators like moving averages or RSI can strengthen your trading strategy and improve your entry and exit points. A bearish harami cross is a variation of the bearish harami pattern where the second candle is a doji, meaning its opening and closing prices are almost at the same level.

How accurate is the Bullish Harami Candlestick Pattern in Technical Analysis?

Yes, the bullish harami candlestick pattern is a bullish trend reversal indicator. The bullish harami candlestick signals trend reversals from a bearish trend to a bullish trend. 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.

Bollinger Bands® can help traders spot levels of support and resistance. When used together, the bullish harami and Bollinger Bands signal slowing momentum to the downside and a potential upside reversal. 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. Traders would enter a long position as the price breaks above the high of the bullish candle. They would place their stop loss below the low of the bullish candlestick.

Although this is not a big amount, we should admit that this is a day trade, which took only a little more than 2 hour. Trades like this are actually, what scalpers and day traders in general are looking for. Ten periods later, the Stochastic Oscillator enters the overbought zone, giving us a signal that this bullish impulse might be exhausted. According to our strategy, this is where we need to exit the trade, collecting the profit.

• 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.
• 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).
• The second candle gaps higher on the next day’s open and prints a small candle contained inside the first candle.
• These may include indicators and chart patterns to confirm valid trades.
• There are certain Take Profit rules when trading the Harami pattern.
• Put your analysis into practice with tight spreads, low commissions, and four advanced trading platforms.

They are often used to short, but can also be a warning signal to close long positions. They are often used to go long, but can also be a warning signal to close short positions. 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.

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 bullish harami candlestick pattern of the end of a trend. Many traders agree that three-bar patterns like the morning/evening star are more reliable than the likes of the harami due to the presence of an extra candle. We recommend you to download our free Candlestick Pattern Bible to find more professional candlestick formations for your needs.

• Both patterns are about potential turning points, just in opposite directions.
• 60-90% of retail investor accounts lose money when trading CFDs with the providers presented on this site.
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To explore bullish harami setups in more than 700 live markets, consider opening an FXOpen account. Put your analysis into practice with tight spreads, low commissions, and four advanced trading platforms. The bullish harami is a straightforward but valuable pattern that can offer an entry point at the start of a possible reversal. While not the strongest reversal signal, contextual clues and added confluence may improve its reliability. While the harami suggests hesitation from sellers and buyers beginning to step in, the engulfing pattern signals a more decisive shift from bearish to bullish. As a result, traders generally view the engulfing as a stronger signal.

Both patterns are about potential turning points, just in opposite directions. The Bullish Harami is the original pattern, characterized by a large bearish candle followed by a small bullish candle that is contained within the range of the large bearish candle. It is considered a relatively weak reversal signal and it’s best used in combination with other technical indicators and chart patterns to confirm a potential trend reversal.

With practice and discipline, trading the Harami Cross can become a powerful addition to your technical analysis toolkit. The stop-loss was triggered the next day, but the profit target was not reached for several days. In this case, the bearish harami indicated only a short-term pullback within a developing uptrend. According to Candle Scanner statistics, traders are more likely to see positive outcomes rather than losses when trading the harami pattern. A bullish engulfing pattern has a small bearish candle followed by a larger bullish one that completely engulfs it.