What it is
The Harami is a two-candle reversal pattern where a small candle is completely contained within the body of the previous larger candle. The name comes from the Japanese word for "pregnant" - the large candle is the mother, the small candle is the baby.
The psychology: The large first candle shows strong momentum. The second small candle shows that momentum has stalled - buyers and sellers are now in balance. This equilibrium often precedes a reversal.
Harami patterns are moderate reliability signals. They indicate potential reversal but should be confirmed with the next candle or additional indicators. A Harami Cross (where the second candle is a doji) is considered stronger.
The psychology
The Harami (Japanese for 'pregnant') shows momentum stalling. Day 1 is a large candle in the direction of the trend - everything seems normal. Day 2 is a small candle whose body fits entirely within Day 1's body. The trend's momentum has suddenly contracted.
Think of it as a shout followed by a whisper. Day 1 was confident and decisive. Day 2 is uncertain and contained. The small body shows that neither buyers nor sellers could push price outside yesterday's range - indecision has replaced conviction.
The Harami is a warning, not a verdict. It says 'the trend may be losing steam' but doesn't confirm a reversal on its own. That's why a third confirmation candle is essential. A Bullish Harami followed by a strong up candle becomes the powerful Three Inside Up pattern.
Identification
- 01Prior trend - Bullish Harami needs a downtrend, Bearish Harami needs an uptrend
- 02Day 1 is a large candle - Strong body in the direction of the trend
- 03Day 2 body inside Day 1 body - The small candle is completely contained
- 04Small Day 2 body - Clear size reduction from Day 1
- 01Day 2 is a doji - Harami Cross is stronger than regular Harami
- 02Decreasing volume on Day 2 - Confirms momentum contraction
- 03Day 2 near the center of Day 1 - Shows maximum indecision
- 04Confirmation candle on Day 3 - Closes in the reversal direction
- 01Day 2 body extends outside Day 1 - Not a harami if it's not contained
- 02Day 1 has a small body - Need clear contrast between the two candles
- 03No prior trend - Harami in a sideways range is meaningless
- 04High volume on Day 2 - Suggests a contested move, not indecision
Execution framework
Wait for third candle confirmation...
Bullish Harami: Below the low of the first (bearish) candle. Bearish Harami: Above the high of the first (bullish) candle. The mother candle's range defines the risk.
T1: Previous swing high (bullish) or swing low (bearish). T2: The harami signals hesitation more than reversal, so use conservative targets at nearby support/resistance. Wait for confirmation candle.
Minimum 1:1.5. Harami patterns are weaker than engulfing - use smaller position size or wait for the third candle to confirm.
Context matters
The Harami is a moderate-strength reversal signal that works best as a warning sign requiring confirmation. It's the first hint that a trend may be tired, not proof that it's over.
- 01After an extended, overextended trend
- 02At established support (bullish) or resistance (bearish)
- 03Day 2 is a doji (Harami Cross) for maximum indecision
- 04Followed by a strong confirmation candle on Day 3
- 05Declining volume through the pattern
- 06With divergence on oscillators like RSI
- 01After only a brief trend move
- 02In the middle of a strong momentum trend
- 03Without a confirmation candle
- 04Day 2 is near the edge of Day 1's body rather than centered
- 05Low-volatility, choppy market conditions
- 06Against the dominant higher timeframe trend
Remember: the second candle must be completely contained within the first candle's body to be a valid harami.
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