Harami

The harami (Japanese for “pregnant”) is a two-candle reversal pattern where a small candle is contained within the body of the preceding larger candle. It signals that the current trend’s momentum is fading and a reversal may be developing.

Understanding the Harami

The harami is essentially the inverse of the engulfing pattern:

• Engulfing: Second candle is larger and engulfs the first
• Harami: Second candle is smaller and contained within the first

While the engulfing pattern shows a decisive shift in power, the harami shows indecision. The small second candle tells you that after a strong move (the first candle), the market could not follow through.

Bullish vs. Bearish Harami

Bullish harami: Appears at the bottom of a downtrend. A large red candle is followed by a small green candle within its body. The small green candle shows selling momentum has stalled.

Bearish harami: Appears at the top of an uptrend. A large green candle is followed by a small red candle within its body. The small red candle shows buying momentum has stalled.

Strengthening the Signal

The harami is a moderate-strength pattern on its own. Add these filters to improve your success rate:

• Key levels: Harami at major support or resistance is more reliable
• Volume: Declining volume on the second candle shows participation is waning
• Harami cross: When the second candle is a doji, the pattern is stronger
• Confirmation: A third candle in the reversal direction adds conviction

The Confirmation Candle

Because the harami is moderate-strength, the confirmation candle is critical:

• For bullish harami: The third candle should close above the top of the harami (first candle’s body boundary)
• For bearish harami: The third candle should close below the bottom of the harami

Without confirmation, the harami often fails to produce a sustained reversal.

Inside Bar Connection

Technically, every harami is also an inside bar (when considering bodies only). Inside bar traders and candlestick traders often identify the same setups using different terminology. The trading approach and risk management are similar for both.

Journal Tracking

Record each harami trade with the size ratio between candles, the location (key level or not), and whether you waited for confirmation. Track your win rate with and without the confirmation candle to determine the optimal approach for your trading.