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"Pregnant" in Japanese - a small candle contained within the previous large candle's body
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 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.
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.
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.
Remember: the second candle must be completely contained within the first candle's body to be a valid harami.
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