Bullish Harami Pattern: A Comprehensive Trading Guide

“Best” means the highest rated of the four combinations of bull/bear market, up/down breakouts. The Bullish Harami Cross is also a candlestick pattern indicating a reversal in a downtrend. It looks like the ‘green’ candle (bullish candle) is the pregnant belly of the red candle (bearish candle).

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The filled or hollow bar created by the candlestick pattern is called the body. A doji is a single candlestick pattern in which the open and close prices of the security or market are the same or very close to it. Analysts looking for fast ways to analyze daily market performance data will rely on patterns in candlestick charts to expedite understanding and decision-making.

For this reason, traders will often combine it with other technical indicators before making trade decisions. The first candlestick is a long down candle (typically colored black or red) which indicates that the sellers are in control. The second candle, the doji, has a narrow range and opens above the previous day’s close. The doji must be completely contained with the real body of the previous candle.

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However, the candle closed below this line, indicating that it did not break out. The next day, a Bearish Harami pattern formed with the Fisher Index at the top, suggesting it may be a good time to short the asset. While Harami patterns are not always reliable, the Fisher Index gave a valid signal as the last big green candle did not break out. Yes, the bullish harami pattern can appear in both uptrends and downtrends on price charts. 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.

When it comes to Forex trading, candlestick patterns are invaluable tools that can help traders identify potential trading opportunities. Although rare, a doji candlestick, especially if it appears in clusters, generally signals a trend reversal indication for analysts, although it can also signal indecision about future prices. Broadly, candlestick charts can reveal information about market trends, sentiment, momentum, and volatility. The patterns that form in the candlestick charts are signals of such market actions and reactions.

Investors looking to identify harami patterns must first look for daily market performance reported in candlestick charts. The accuracy of bullish harami patterns depends on how they are employed in your trading strategy. Generally, while it can work, the pattern is less accurate when used on its own.

Using a Doji to Predict a Price Reversal

This pattern is a stronger signal of a potential bearish reversal due to the indecision indicated by the Doji. The first candlestick, known as the ‘mother’, is long, while the second one, the ‘child’, is smaller and is contained within the range of the first candlestick. The Harami Cross is a variant of the Harami pattern where the second candlestick is a Doji (a candlestick where the open and close prices are virtually the same), signaling market indecision. As with any trading analysis/technique, the harami cross technique comes with many advantages and disadvantages.

1. 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.
2. Traditional traders enter short on a break of the high of the second doji candle and place a stop loss below the low of the first large candlestick.
3. The significance of Harami patterns can vary depending on the timeframe in which they appear.
4. The second candlestick has a small real body and it remains contained within the real body of the first candlestick.
5. Once the pattern is identified, data-driven forex traders will wait for a break of the pattern’s high and then enter short when the price falls through that same high.
6. Always do your own careful due diligence and research before making any trading decisions.
7. It looks like the ‘green’ candle (bullish candle) is the pregnant belly of the red candle (bearish candle).

Hundreds of markets all in one place – Apple, Bitcoin, Gold, Watches, NFTs, Sneakers and so much more. The best average move 10 days after the breakout is a rise of 4.05% in a bear market. The move also gives a 10-day performance rank of 45, whichis mid list between 1 (best) and 103 (worst). A Doji is formed when the close price and the high price are the same or very close.

The Harami pattern serves as a strong reversal signal, especially when it appears after a prolonged downtrend. The smaller candlestick within the pattern represents indecision or a temporary pause in selling pressure, while the larger candlestick signifies a potential shift in sentiment. This pattern suggests that the bears are losing control, and the bulls might be ready to take charge, leading to a possible trend reversal. The presence of the small doji candle within the pattern indicates indecision in the market, followed by a strong bullish move.

1. One large green candle consumes the entire span of the previous red candle, showing buyers’ dominance.
2. Harami patterns spotted on daily or weekly charts tend to carry more weight than those on shorter intraday charts.
3. In conclusion, these patterns have proven to be valuable tools for making profitable trades.
4. In Japanese, “doji” (どうじ/ 同事) means “the same thing,” a reference to the rarity of having the open and close price for a security be exactly the same.
5. By understanding the intricacies of the Harami pattern, traders can gain valuable insights into market trends and make more informed trading decisions.

This RSI divergence, therefore, supports the potential for a bullish reversal when the second candle—a much smaller bullish candle—gaps up above the first candle and completes the bullish harami pattern. Investors and traders usually use the bullish harami candlestick pattern with technical indicators like the MACD and RSI to cross-check and confirm the signals the harami pattern produces. Using technical indicators along with the bullish harami candlestick pattern prevents incurring losses or limits the loss incurred. The main disadvantage of the bullish harami candlestick is the need to wait for the trend reversal confirmation.

However, you should look for additional bullish signals in the following trading sessions. Moreover, before making any decisions, it’s crucial to consider the overall market context and other signals to validate the pattern’s reliability. By placing your stop-loss here, you limit potential losses while giving the trade enough room to develop if the anticipated reversal occurs. Both patterns highlight market indecision and the possibility of a change in the prevailing trend. Combining bullish crossovers on the MACD with RSI exiting oversold territory serves as convincing evidence upside conviction is bullish harami cross candlestick pattern building after the harumi’s indication of seller fatigue.