Bullish Harami Candlestick Pattern Trading Strategy and Backtest Definition & Meaning

A candlestick chart (also called Japanese candlestick chart or K-line[5]) is a style of financial chart used to describe price movements of a security, derivative, or currency. With the price below the 50-day SMA and bullish harami cross candlestick pattern a sizeable red closing marubozu candle followed by a doji engulfed in the previous, the pattern is set. With an understanding of how to identify this bullish reversal pattern, let’s learn how to trade it optimally.

• Between 74%-89% of retail investor accounts lose money when trading CFDs.
• If the trend is moving upward and then begins to flip with the Doji again within the last stick candle, it is considered a bearish pattern/reversal.
• The first candlestick is referred to as the “mother” with a large real body that embodies the smaller second candlestick, and thus creating the visual of a pregnant mother.
• Since the bullish harami is a trend reversal pattern, you want to confirm the reversal with another momentum indicator.

We’re going to cover its meaning, how you can improve its accuracy, and provide some examples of trading strategies that rely on the bullish harami pattern. According to the book Encyclopedia of Candlestick Charts by Thomas Bulkowski, the Evening Star Candlestick is one of the most reliable of the candlestick indicators. It is a bearish reversal pattern occurring at the top of an uptrend that has a 72% chance of accurately predicting a downtrend. As seen in the GBP/USD 30-min chart, the RSI crossover occurs exactly at the same time when the bullish harami appears and is above the 30 level.

Harami Candlestick – Bullish & Bearish Harami Pattern

The price moved higher into a resistance area where it formed a bearish harami pattern. This provided confirmation and an opportunity to exit longs or enter short positions. A bullish harami is a two-candle bullish reversal pattern that forms after a downtrend. The first candle is bearish, and is followed by a small bullish candle that’s contained within the real body of the previous candle. The bullish harami belongs to the category of most popular candlestick patterns and is relied upon by many traders in their analysis of the markets. In terms of meaning, both patterns indicate that the price is about to reverse.

Typically, traders don’t act on the pattern unless the price follows through to the upside within the next couple of candles. Sometimes the price may pause for a few candles after the doji, and then rise or fall. A rise above the open of the first candle helps confirm that the price may be heading higher. On easy way to gauge the strength of a trend is to look at the ranges of the candles.

Bullish Harami Examples

The day after pattern identification, the price does not fall below 19.37, so no action is taken. The price drops below and rises above the low on the second day, triggering a long entry at $19.37. Government regulations require disclosure of the fact that while these methods may have worked in the past, past results are not necessarily indicative of future results. Losses incurred in connection with trading stocks or futures contracts can be significant. Neither Americanbulls.com LLC, nor Candlesticker.com makes any claims whatsoever regarding past or future performance. All examples, charts, histories, tables, commentaries, or recommendations are for educational or informational purposes only.

The bearish harami pattern occurs in an uptrend, with the first candle being a bullish green candle followed by an engulfed doji. Keep in mind traders should not take a position in haste because this pattern is not that strong. Technical analysts and experts do not trust the pattern on smaller timeframes. However, experts advise to wait for confirmation before making decisions https://g-markets.net/ on the basis of the harami cross pattern. Furthermore, traders need some other methods to determine when to enter or exit the market because the harami cross does not have profit targets. A bullish harami pattern is a type of two candlestick formation and reversal indicator that may alert traders to a possible bullish reversal from downtrends on a price chart.

Bullish Harami Cross: Identification Guidelines

The downtrend meanders lower instead of the
straight-line runs that I like to see. The breakout from this candle pattern is upward when price closes above the top of the bullish harami cross. Since the primary trend before the pattern began was downward, the price trend resumes falling during
the trading doldrums of August. Market volatility, volume and system availability may delay account access and trade executions.

Requires understanding of supporting technical analysis or indicators. Traders may also watch other technical indicators, such as the relative strength index (RSI) moving up from oversold territory, or confirmation of a move higher from other indicators. The Bullish Harami pattern occurs after a downtrend and becomes more significant the more the market has gone down. Earlier we talked about how a bullish harami could be improved by taking volatility into account. Sometimes a pattern that’s formed with high volatility is more reliable than one that’s formed in low volatility conditions. What works best depends on the market and timeframe you’re trading, and you should test and see what works the best for you.

Complex patterns

In addition, the pattern may be more significant if occurs near a major resistance level. Other technical indicators, such as an RSI moving lower from overbought territory, may help confirm the bearish price move. Margex unique UI helps even beginner traders to trade easily and utilize the technical analysis tools available to spot great bullish reversal trends like the bullish harami candle pattern.

Harami candlestick pattern is the opposite of the engulfing pattern, except that the candlesticks in the harami candlestick pattern can be the same color. The Harami that means “pregnant” in Japanese is multiple candlestick patterns is considered a reversal pattern. A Marubozu Candlestick pattern is a candlestick that has no “wicks” (no upper or lower shadow line). A green Marubozu candle occurs when the open price equals the low price and the closing price equals the high price and is considered very bullish. A red Marubozu candle indicates that sellers controlled the price from the opening bell to the close of the day so it is considered very bearish.

Contents

The Bullish Harami Cross appears in a downtrend and predicts its reversal. A doji candle appearing as the second line indicates the market indecision. Interestingly, in order to recognize the pattern as valid, its first line needs to be a long black candle, which may become an important resistance zone. For this reason, the one should be careful when such pattern is formed on the chart. Now, you might also want to look at volume of the individual candles that make up the bullish harami pattern.

Key takeaways A morning star pattern is a bullish 3-bar reversal candlestick patternIt starts with a tall red candle,… It occurs after an upward trend with a long upward candle meaning the buyers are in control. The upward candle is then followed by a doji which, similarly to before, must be within the previous candle’s length. It represents indecision from the buyers and potential change of momentum because the doji “gaps” open closer to the mid-range of the previous candle.

Trading Harami with Indicators:

The most important aspect of the bearish Harami is that prices gapped down on Day 2 and were unable to move higher back to the close of Day 1. But before we get into the best trade strategies, let’s understand how most professional traders lose money on this pattern. Notice how there are numerous areas on the chart where the market has gapped – showing wide open spaces between candles. To be included in a Candlestick Pattern list, the stock must have traded today, with a current price between $2 and $10,000 and with a 20-day average volume greater than 10,000. Many traders dream of being able to generate highly profitable trades on a consistent basis to earn regular income from… The pregnant mother would be the first (long) candlestick, and her unborn child would be the short candlestick engulfed by the long candlestick.