Bearish Harami Cross Explained & Backtested 2025
Volume is perhaps one of the most fundamental technical analysis tools you can use to increase your success rate in trading. Unlike other technical indicators that rely heavily on price, volume is independent of price, making it one of the most essential concepts to understand in trading. As a rule of thumb, when a bullish harami pattern occurs, we want to see above-average volume on the second candle (the small bullish candle), which is the case in this illustration. This is because the significant volume, coupled with the jump in price (gap up), shows that buyers are starting to gain control.
In a bullish Harami, the first candle is red and the second is green. We can see in the chart how after the pattern formation, the prices have gapped down confirming the reversal signaled by this pattern. One should note that the important aspect of the bearish Harami candlestick is that prices gapped down on Day 2, and also, they were unable to move higher back to the close of Day 1. A Bearish Harami candlestick is formed when there is a large bullish candle on Day 1 and is followed by a smaller bearish candle on Day 2. The Harami candlestick pattern is the opposite of the engulfing pattern, except that the candlesticks in the harami candlestick pattern can be the same colour.
Remember that while the Bullish Harami can provide valuable insights, it should be used in conjunction with other analysis and risk management tools for a well-rounded trading strategy. The Bullish Harami pattern consists of two candlesticks, where the first candle is a large bearish candle followed by a smaller bullish candle. The bullish candle is completely engulfed within the range of the previous bearish candle, creating a visual representation of a pregnant woman.
The bearish harami pattern is a reliable reversal pattern found at the top of uptrends. This two-candlestick pattern signals that a bearish reversal is imminent in the stock’s price. Bearish harami patterns are two candlestick patterns that are found at the top of uptrends. The first candle is a larger bullish one, followed by a smaller bearish candle that fits inside the bullish candle, setting up a reversal to the downside. Look for the price to fail the second candle and hold to confirm bearish continuation.
These retracements help identify potential support and resistance levels based on the Fibonacci sequence. These confirmations can provide additional confidence that the market is reversing upwards, making it a good bullish harami candlestick pattern time to consider entering a long position. MACD can show whether the market is gaining bullish momentum, while RSI helps identify overbought or oversold conditions.
E. Trading Bullish Harami with Moving Averages (MA)
Three Inside Up is a three-candle bullish reversal that begins with a bearish candle, followed by a small bullish candle within its body, and ends with another bullish candle closing higher. Japanese candlestick texts emphasized confirmation structures like this for reliability. Western traders later recognized it as a more trustworthy variant of the Engulfing. Because of its rarity, traders often treat it as a very strong bullish reversal. Its gap-driven nature reflects a complete shift in market psychology. It occurs when bulls briefly allow sideways or minor bearish action before pushing prices higher.
Trading the Bearish Harami Pattern
Dojis are widely regarded as indecision candles and rarely appear in a recognised two-bar structure like the harami cross. This makes the latter a distinct pattern with arguably greater significant than the ordinary harami. Targets are set based on recent resistance or using a risk-to-reward approach.
That is why it is important to understand technical analysis, candlesticks, and patterns when trading. A single candlestick illustrates how traders from around the world felt about a stock on that particular day. Establishing a clear stop-loss level, typically below the low of the bullish candle in the Bullish Harami, guards against potential losses. Simultaneously, setting a realistic take-profit target based on historical price action or resistance levels helps secure profits. The Bullish Harami pattern is a valuable tool for swing traders, providing insights into potential trend reversals and buying opportunities.
An investor could potentially lose all or more of their initial investment. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Testimonials appearing on this website may not be representative of other clients or customers and is not a guarantee of future performance or success. Rising wedge patterns are bigger overall patterns that form a big bullish move to the upside. However, since it was near previous resistance, it had a brief breakout, becoming a fakeout and a head and shoulders failure. Using technical analysis in conjunction with patterns is helpful in gauging moves.
- This article explores the structure and formation, market psychology, and other key factors and considerations.
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- Engulfing means that one candle’s open and close fit within the real body of the engulfing candle.
- Bulls then step in with a strong third candle, confirming that the market has transitioned from uncertainty to clear bullish control.
Bullish Engulfing:
When the pattern lines up with one of these supports, the odds of the market bouncing increase. Entry typically happens after a bullish confirmation, and the stop-loss is placed just below the support level or the pattern’s low. Profit targets are often based on prior swing highs or the next resistance levels. As more buyers step in once the price breaks the pattern’s high, a trend reversal is likely to occur.
Essential Chart Patterns Every Trader Should Master in 2025
As the stock price starts to rally, it encounters resistance at the predetermined level, and you decide to take profits. When considering an entry based on the Bullish Harami, analyzing trading volumes can provide crucial confirmation. A spike in volume accompanying the pattern suggests heightened buying interest, reinforcing the validity of the reversal signal. For example, suppose a swing trader identifies an upward trend in a stock’s price using moving averages.
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The third candle is a large bullish candlestick that closes beyond the midpoint of the first candle’s body. This pattern consists of a single bullish candlestick that opens near its low and closes near its high, creating a long white body. It is considered a bullish signal, especially if it appears after a downtrend. This is a doji candlestick with a long lower wick and little to no upper wick. It signals that the price opened and closed at the high of the trading period and suggests potential bullish reversal. Resembling the shape of real-life candlesticks, these charts earned their name.
LiberatedStockTrader also ranks it above average for reliability in trending markets. Traders see the Rising Three as confirmation that a trend is healthy and resilient. The weak mid-session pullbacks reassure that bears are unable to alter the bigger picture. Japanese traders historically described it as one of the strongest continuation indicators. It has since become a global standard among analysts for confirming powerful upward momentum. Traders typically wait for bullish confirmation before acting, but the twin lows create a compelling support level.
We detail both platforms in our Best Candlestick Pattern Recognition Software Review. Liberated Stock Trader Pro Investing CourseOur pro investing classes are the perfect way to learn stock investing. Yes, our data shows the Bullish Harami and Bullish Harami Cross can be used for buy and sell signals. They average a 55.25% win rate and 3.95% per winning trade across 5,624 trades. Thanks to TrendSpider’s strategy tester, we can see the Bullish Harami Cross’s high 5.7% average winning trade on Apple Inc.
- Swing traders can greatly benefit from utilizing the bullish harami pattern as a reliable signal for potential reversals in the market.
- The bullish candle indicates that the buyers are starting to take control, which is why this pattern is a sign of potential upward movement.
- Time frame matters significantly—Dark Cloud Cover patterns on weekly charts carry substantially more weight than those on intraday charts.
- Bullish haramis are very popular patterns found in all different time frames.
- The psychology behind the bullish harami candlestick pattern explains shifting dynamics between buyers and sellers within the market.
Trading with MACD and RSI
Analyse the patterns formed by multiple candlesticks to identify potential market trends and reversals. For traders new to these concepts, practicing pattern recognition in a Forex demo account provides the perfect risk-free environment to develop this critical skill. Position sizing and risk management transform pattern recognition from interesting analysis to profitable trading. Determine your risk tolerance before entering trades, establishing clear stop-loss levels below key support for bullish patterns or above resistance for bearish patterns. Consider scaling into positions if the reversal develops gradually rather than committing full capital immediately. Combine these visual signals with technical confluence factors like support/resistance levels, trend lines, moving averages, and momentum indicators.
However, when it appears randomly throughout a downtrend, its predictive power drops to near-random levels. The bullish harami isn’t just a technical pattern—it’s a window into the collective soul of market participants at the moment they change their minds about an asset’s direction. Waiting for that third confirmation candle can significantly improve your win rate and help you avoid dangerous false signals. Experienced traders might enter on the close of the baby candle if they have strong supporting factors, but patience usually pays off better than speed in this game. Bollinger Bands help you contextualize when the market is overstretched or compressed.
