The Harami is a two-candle candlestick reversal pattern, Japanese in origin and popularized in Western markets by Steve Nison’s Japanese Candlestick Charting Techniques (1991). Its defining feature is strict body containment: the second candle’s open-to-close range must sit entirely within the first candle’s open-to-close range — wicks are irrelevant. When this occurs after an extended trend, it signals that momentum may be exhausting.
Key Takeaways
- The harami’s reversal rate is only ~53% (bullish) and ~55% (bearish) per Bulkowski — treat it as a confirmation signal, not a standalone entry trigger.
- The Harami Cross variant, where the second candle is a doji, carries a stronger indecision signal and is preferred over the standard harami.
- A third confirmation candle closing in the reversal direction is required before entering; entering on the harami candle alone fails nearly half the time.
How the Harami Works
The harami comes in two variants based on the preceding trend:
Bullish Harami — appears after a downtrend. The first candle is a large bearish candle (open above close). The second candle is a small bullish candle whose entire body — open to close — falls within the first candle’s body. The small body signals that sellers are losing control.
Bearish Harami — appears after an uptrend. The first candle is a large bullish candle. The second is a small bearish candle contained within the first. Buyers are losing momentum.
Harami Cross — a stronger variant where the second candle is a doji (open equals close, or very nearly so). Maximum indecision at a single price level amplifies the reversal signal beyond what a small-bodied candle provides.
For the pattern to be valid, the second candle’s body must be 50% or less of the first candle’s body. Some technicians require 25% or less for what they call a “strong” harami. The containment rule applies only to bodies — wicks extending outside the first candle do not invalidate the pattern.
The pattern is most reliable on daily and weekly charts. On sub-5-minute charts, noise dominates and the pattern produces excessive false signals.
Practical Example
SPY has been in a 5-day downtrend, falling from $520 to $505. On Day 5, a large bearish candle opens at $508 and closes at $503 — a 5-point body. On Day 6, SPY opens at $504 and closes at $505.50, a 1.5-point bullish body sitting entirely inside the prior day’s $503–$508 range. RSI is at 32 (oversold) and the $503–$504 zone is a prior support level. This is a textbook Bullish Harami with two confirming conditions beyond the pattern itself.
The trader does not enter on Day 6. Instead, they wait for Day 7. SPY opens above $505.50 and pushes higher — the confirmation candle. Entry is taken at $506 with a stop at $502.50 (below the pattern low), targeting $512. Risk: $3.50 per share. Reward: $6.00 per share. Risk/reward: 1:1.7.
Without the Day 7 confirmation, Bulkowski’s data shows the setup fails 47% of the time — meaning entering on the harami candle itself is statistically indistinguishable from a coin flip with no edge.
The harami is a two-candle reversal pattern where a small second candle forms inside the body of a larger first candle. It signals weakening trend momentum and works best at support or resistance when confirmed by a third candle closing in the reversal direction.
Common Mistakes
- Entering on the harami candle itself. The pattern only suggests a reversal may be starting. Without a confirmation candle closing beyond the second candle in the reversal direction, the entry has no statistical edge.
- Ignoring the containment rule. If the second candle’s body extends outside the first candle’s body — even slightly — the pattern is not a harami. Traders sometimes confuse it with an inside bar, which uses highs and lows rather than just the open-to-close body range.
- Trading haramis in isolation. A 53% reversal rate means roughly 1 in 2 patterns fails. Combining the pattern with a key support or resistance level, an oversold RSI reading, or above-average volume meaningfully improves selectivity.
- Applying it to short timeframes. On 1-minute or 5-minute charts, the pattern fires constantly and lacks the trend context needed for a valid reversal signal. Stick to daily charts or higher for meaningful setups.
How JournalPlus Tracks Harami
JournalPlus lets you tag trades with pattern labels like “harami” and filter your trade history to see exactly how your harami setups have performed — by timeframe, sector, and whether you waited for confirmation or entered early. Over time, your journal reveals which context produces your best harami win rate, turning a 53% statistical baseline into a personalized, data-backed edge.
