What is a Harami candlestick pattern? Imagine you’re drawing with crayons and making a big, colorful drawing of a house. Now, you draw a smaller house inside the big one. That’s kind of like the Harami candlestick pattern in trading!

What’s a Harami Pattern?

The word “Harami” is a Japanese word that means “pregnant.” In trading charts, a Harami pattern looks like a big candle with a smaller one inside it, like how a baby is inside a mommy’s tummy.

This pattern is made up of two candles:

1. Big Candle (Mother Candle): This is the first candle and it’s big. It shows the current trend in the market.
2. Small Candle (Baby Candle): The second candle is much smaller and fits inside the range of the big candle. It means the market might be getting ready to change direction.

There are two types of Harami patterns:

1. Bullish Harami: This happens when the market is going down, and the smaller candle suggests the market might start going up.
2. Bearish Harami: This happens when the market is going up, and the smaller candle suggests the market might start going down.

How To Spot 

Finding a Harami pattern on a chart is pretty easy. Here’s how:

1. Big Candle: Look for a long candle. If the market is doing well, the candle might be green or white. If the market is doing poorly, it might be red or black.
2. Small Candle: Next, find a smaller candle that is inside the range of the big candle. This means the small candle’s body doesn’t go higher or lower than the big candle’s range.

The important thing is that the small candle doesn’t break out of the big candle’s high or low. This might mean the current market trend is slowing down.

Why the Harami Pattern is Important in Forex Trading

The Harami pattern is useful because it can show when the market might change direction. For example:

• A Bullish Harami at the end of a downtrend (when prices have been falling) can mean the market might start going up.
• A Bearish Harami at the end of an uptrend (when prices have been rising) can mean the market might start going down.

But don’t rely on this pattern alone. It’s a good idea to check it with other tools, like moving averages or the Relative Strength Index (RSI), to make sure it’s giving you the right signal.

Pattern Usage In Trading

1. Look for Support and Resistance: If a Bullish Harami forms near a strong support level (where prices usually stop falling), it might be a good time to buy, expecting prices to go up.
2. Combine with Other Strategies: Use this pattern with other trading strategies. For example, wait for the Harami pattern after a strong trend to catch the change in direction.
3. Set Stop-Loss Orders: Place stop-loss orders just outside the pattern range to protect yourself from big losses.

Common Mistakes and Tips

• Don’t Rely on It Alone: This pattern is helpful but not always perfect. Sometimes, market conditions can make it tricky. Always check with other tools before making a trade.
• Watch the Size: If the second candle is too tiny, it might mean the market is unsure rather than showing a clear reversal. Look for more signs to be sure.