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Harami candlestick pattern Wikipedia

However, for the pattern to be valid, it must either occur in an existing downtrend that is actively making lower lows or during the pullback phase (a temporary market decline) of an uptrend. Comparatively, the bullish engulfing pattern is generally considered a stronger bullish reversal pattern since the second bullish candle completely engulfs or covers the first small bearish candle. In the example above, Tesla falls to shape a double bottom pattern.

Strategy 3: Pullback Entry

• The two candles that comprise the signal are similar in size, but the first candle manages to engulf the second.
• You can test how successful your harami and cluster trading strategies could be by using the ATAS Market Replay simulator.
• Generally, you can put more weight into multi-stick patterns than single candles.
• A lowering volume indicates a weakening bearish movement while increasing volumes indicate weakening bullish trends.

During the second low of the double bottom pattern, a bullish harami pattern appears. Simultaneously, the low of the bullish harami prints near the lower Bollinger band. The second candle gaps higher on the next day’s open and prints a small candle contained inside the first candle. A trader would wait for confirmation of a continued rally before enter the position.

By understanding these components in detail, traders can interpret the Harami candlestick pattern more effectively and use it as a reliable indicator of market shifts. If you’re trading with a regulated forex broker, you can optimize your trades by combining the Harami pattern with additional tools like moving averages or RSI for confirmation. This article will guide you through the pattern’s components, types, applications, and strategies, ensuring you can leverage it effectively in your trading decisions. As a bullish reversal pattern, the Bullish Harami is a great pattern to watch for when the price is on an uptrend.

The Bullish Harami: From Bearish Dominance to Potential Reversal

The pattern symbolizes a moment of indecision, where one side is weakening but hasn’t entirely lost control. This dynamic provides crucial insights into the market’s emotional state and can be a valuable indicator of an impending trend reversal. The contrast in colors between harami candle the two candles amplifies the visual clarity of the Harami pattern, making it easier for traders to spot emerging opportunities. According to the Encyclopedia of Candlestick Charts by Thomas N. Bulkowski (link), the Bullish Harami candlestick pattern has a success rate of 53%.

• One of the most flexible indicators, moving averages, can serve multiple purposes when a bullish harami pattern appears on the price chart.
• Always watch out for trend exhaustion signs like decreasing indicators of momentum or long wicks and integrate moving averages into your analysis for confirming pattern validity.
• In this article, we will do a deep dive into 3 types of thrusting line candlestick patterns.
• 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.

What makes a pattern valid is not just the shape, but also the location where it appears. The information on this website does not constitute investment advice, a recommendation, or a solicitation to engage in any investment activity. Stop-losses can also be an important tool for minimizing your chance of risk and controlling the amount of money you’re comfortable losing. Patterns like the harami are much better idea givers than trade makers. The markets are often characterized as a battle between the bulls and the bears.

This formation suggests a potential market reversal, offering an entry point for traders considering long positions. With that said, we can see that the two patterns are a complete mirror of each other. Learn to identify bullish and bearish harami patterns with practical examples and trading strategies. Looking closely, we can observe how the bullish harami was also preceded by a bearish trend (downtrend). The Harami is a reversal candlestick pattern that appears in both bullish and bearish variants.