The Harami Pattern
Before you jump to conclusions, ‘Harami’ is not the Hindi word you’re thinking about 😉 In actuality, it is an old Japanese term that means ‘pregnant’. Looking at the candlestick formation should explain why this word was chosen.
The harami pattern is composed of two candles. The first one is usually long, and the second has a much smaller body, and in most cases, they differ in colour. This formation can indicate a potential reversal of the current trend. It can be either a bullish or a bearish variant.
The Bullish Harami
The bullish harami is indicative of a potential shift in trend, as it appears at the bottom of the chart. It forms over two days, similar to the engulfing pattern.
In the chart, the bullish harami pattern has been marked out.
The following are the trade setup for bullish harami:
Once a trade has begun, the trader must wait to see if their order will be fulfilled or their stop loss activated.
This chart shows a candlestick pattern that is not a bullish harami. Even though the encircled candles look like this particular formation, the nearly flat prior trend prevents us from defining it as such.
In this case, a bullish harami pattern had emerged, but the stop loss triggered and caused a deficit.