Harami Pattern Strategy

BySachin Kotecha

The Harami pattern strategy is a popular and effective candlestick trading approach used to detect potential market reversals or pauses in trend momentum. Originating from Japanese candlestick analysis, the Harami pattern reflects a change in trader sentiment and is often an early signal of upcoming price shifts. When applied with the right context and confirmation, this pattern can offer excellent entry and exit opportunities.

This article explains how to identify, interpret, and trade the Harami candlestick pattern using structure, trend, and advanced entry techniques.

What Is the Harami Candlestick Pattern?

The Harami pattern is a two-candle formation that signals indecision or a potential reversal in the market. It consists of:

A large trend candle (bullish or bearish)
A smaller inside candle that is fully contained within the body of the previous candle

The word “Harami” means “pregnant” in Japanese, with the first candle symbolising the “mother” and the second the “baby”.

There are two types:

Bullish Harami: Appears after a downtrend. Large bearish candle followed by a smaller bullish candle.
Bearish Harami: Appears after an uptrend. Large bullish candle followed by a smaller bearish candle.

Why the Harami Pattern Works

The Harami signals a slowdown in trend momentum. The large first candle represents strong sentiment in the existing trend, but the second candle shows indecision or a lack of follow-through. This often leads to a reversal or a pause.

However, like many candlestick patterns, it becomes more effective when supported by:

Key technical levels
Volume confirmation
Broader trend context

How to Trade the Harami Pattern Strategy

To trade the Harami pattern strategy effectively, traders should apply a structured approach that incorporates technical confluence, entry filters, and price action logic.

1. Identify a Clear Harami Setup

Bullish Harami:

Appears after a downtrend
Large red candle followed by a small green candle completely inside the first candle’s body

Bearish Harami:

Appears after an uptrend
Large green candle followed by a small red candle completely inside the first candle’s body

Note: The second candle does not need to be a Doji, but smaller candles with tight ranges signal stronger indecision.

2. Confirm Key Context and Location

The Harami is more reliable when it forms at:

Support or resistance zones
Trendline touches or channel boundaries
Major Fibonacci retracement levels
Round number levels (e.g. 1.2000 on EUR/USD)

Tip: A Harami in the middle of a trend with no technical level nearby is less meaningful.

3. Entry Strategy Options

Conservative Entry:

Wait for confirmation with a third candle that closes above (for bullish) or below (for bearish) the high or low of the Harami range.
Enter after confirmation candle close or on a small pullback.

Aggressive Entry:

Enter at the break of the Harami’s high (bullish) or low (bearish).
Use tighter stops but only if confluence supports the setup.

4. Stop-Loss and Take-Profit Placement

Stop-Loss:

Below the low of the Harami formation (bullish)
Above the high of the Harami formation (bearish)

Take-Profit:

Nearest swing high/low or technical barrier
Fibonacci extension (127.2%, 161.8%)
Fixed R:R target (2:1 or higher recommended)

5. Combine with Indicators for Strength

Enhance your edge with confluence:

RSI divergence with the trend supports reversal
MACD crossovers can confirm momentum shift
Bollinger Band reversals often align with Harami signals

Volume can also confirm the reliability of the pattern—higher volume on the second candle or confirmation candle suggests stronger sentiment shift.

6. Best Timeframes and Markets

Timeframes: 1H, 4H, Daily, and Weekly for higher reliability
Markets: Forex, indices, stocks, commodities

Harami patterns are more effective in liquid and trending markets.