Harami Pattern: Decode Market Indecision and Reversals
What Is Harami Two-candle pattern where small candle (child) forms within previous large candle's body (mother). Signals trend exhaustion and potential reversal. Japanese word meaning "pregnant."
Bullish vs Bearish Harami Bullish Harami: Large red candle followed by small body within it at downtrend bottom—buyers entering. Bearish Harami: Large green followed by small body at uptrend peak—sellers emerging
Pattern Psychology Large first candle shows strong trend. Small second candle reveals momentum loss and indecision. Market pauses, neither bulls nor bears control, signaling possible direction change
Trading Strategy Wait for third candle confirmation. Bullish: Enter long if third closes above Harami high. Bearish: Enter short if third closes below Harami low. Stop-loss beyond first candle
Boost Reliability Combine with volume analysis, low volume on second candle strengthens signal. Use RSI (overbought/oversold), support/resistance levels. Harami Cross (Doji as second candle) most powerful variation