Bullish Harami Candlestick Pattern: Backtest Analysis

bullish harami cross candlestick pattern

Prior to making any decisions, carefully assess your financial situation and determine whether you can afford the potential risk of losing your money. As the prior trending move reaches its completion point, the formation of a Harami pattern can be used as the basis for live market positions. Sometimes a pattern that’s formed with high volatility is more reliable than one that’s formed in low volatility conditions.

What Types of Market Conditions Are Best Suited for a Bullish Harami?

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To enhance the precision of this harami cross’s predictive capacity for bullish reversals, incorporating other technical indicators can be beneficial. For instance, utilizing signals such as the relative strength index climbing from oversold conditions may increase accuracy and ensure greater proximity to hitting the target center. Identifying a Bullish Harami Cross pattern is like spotting a lighthouse in a storm. Amid a downtrend, look for a large down candle, a towering figure signaling a strong bearish trend. Following this, a small doji candlestick appears, its tiny form completely contained within the body of the prior large down candlestick. The doji, like a lighthouse’s beam piercing through the storm, reflects the market’s indecision.

Bullish Harami Trading Strategies

The low of the bullish harami cross pattern occurs on the first candle at $19.37. The day after pattern identification, the price does not fall below 19.37, so no action is taken. The price drops below and rises above the low on the second day, triggering a long entry at $19.37.

  1. Both are supposed to be reversal patterns, but history tells us volatility is more likely than a trend reversal.
  2. The data shows us that the patterns likely mean volatility is incoming and that traders should go against the grain and listen to the data instead of trading like everyone else.
  3. This pattern, with its long bearish candle followed by a doji, can signal a potential shift from bearish to bullish sentiment, providing a valuable signal for traders.
  4. Imagine a market in a downtrend, where a long bearish candlestick is followed by a Doji, which is contained within the range of the previous candlestick’s body, like a child nestled in their parent’s shadow.

AskTraders Summary: The Harami Candlestick Pattern

While the bullish harami pattern can be helpful in identifying potential trend reversals, traders never rely solely on it when making trading decisions. It’s crucial to incorporate technical indicators and risk management strategies to minimise potential losses. Additionally, traders must be mindful of false signals and adjust their trading strategies accordingly to increase their chances of success. Once you feel confident in your strategy, you can open an FXOpen account and apply it to live trading.

The pattern is more commonly used on daily and weekly timeframes, as it allows traders to see the overall market sentiment and trend. However, it can also be used on shorter timeframes such as the 4-hour and hourly charts, to get a more granular view of price action and potential reversal points. Investors seeing this bullish harami may be encouraged by this diagram, as it can signal a reversal in the market. After a Bullish Harami Cross pattern, the market might be ready to change its tune. The pattern, like a conductor’s baton, signals a potential shift in rhythm from a downtrend to an uptrend. However, before the orchestra starts playing a new melody, the conductor’s signal needs confirmation.

It is used to look for buying opportunities, in anticipation of an upswing in price after a downswing. Hakan Samuelsson and Oddmund Groette are independent full-time traders and investors who together with their team manage this website. If entering a short, a stop loss can be placed above the high of the doji or above the high of the first candle.

Also, the use of big data and predictive analytics can provide a more in-depth analysis of market trends. For a bullish harami to appear, a smaller body on the subsequent doji will close higher within the body of the previous day’s candle, signaling a greater likelihood that a reversal will occur. With an understanding of how to identify this bullish reversal pattern, let’s learn how to trade it optimally. The Bullish Harami Cross pattern emerges with a regularity similar to the intermittent song of a bird, presenting itself at uniform intervals though not incessantly. In an extensive review spanning two decades across the S&P 500, this harami cross pattern has manifested on 1,132 occasions.

What works best depends on the market and timeframe you’re trading, and you should test and see what works the best for you. During the rest of the day selling pressure tries to push the market lower, but buyers are there each time to prevent the market from heading lower. The bulls even manage to push prices a little higher, albeit not above the open of the previous bar.

In this section of the article, we wanted to show you a couple of different approaches we use to improve the accuracy of different patterns. This is a major sign of strength that leads to more people placing buy orders, which in turn fuels the coming uptrend. Time flies, especially when things are running smoothly, and this year so far has been a period free of dramatic events across the capital markets. Any opinions, analyses, reviews or recommendations expressed here are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any financial institution.

Conversely, if the candles leading up to the pattern are small and insignificant compared to other candles, that’s a sign that the trend is weak and might break more easily. You can examine how to analyse bull and bear harami setups on charts of different assets and on different timeframes for free using the FXOpen TickTrader platform. The owner of this website may be compensated in exchange for featured placement of certain sponsored products and services, or your clicking on links posted on this website. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear), with exception for mortgage and home lending related products. SuperMoney strives to provide a wide array of offers for our users, but our offers do not represent all financial services companies or products. The first candlestick is the mother with the child candlestick fitting within the body of the prior.

Just like avoiding potholes on a road trip, avoiding these common mistakes can make your trading journey smoother and more successful. After the second day’s candlestick, a buy order could be placed, with a stop loss order set below the low of the two-day pattern. So, when trading the Bullish Harami Cross, patience and confirmation are key. Both are supposed to be reversal patterns, but history tells us volatility is more likely than a trend reversal. With the pattern identified, traditional traders enter long on a break of the high of the second candle and place a stop loss below the low of the first bearish candle.

bullish harami cross candlestick pattern

In addition to confirmation, traders may also give a bullish harami cross more weight or significance if it occurs at a major support level. If it does, there is a greater chance of a larger price move to the upside, especially if there is no nearby resistance overhead. The first candlestick is a long up candle (typically colored white or green) which shows buyers are in control. This is followed by a doji, which shows indecision on the part of the buyers. Once again, the doji must be contained within the real body of the prior candle.

The only difference between a bullish harami candlestick pattern and a bullish harami cross is that the second candle of the bullish harami doesn’t need to be a doji. Engulfing means that one candle’s open and close fit within the real body of the engulfing candle. In bullish harami cross patterns, the first candlestick engulfs the second doji.