High Accuracy Price Action Strategy (Trading The Bullish & Bearish Harami Price Action). The harami price action pattern is a two candle pattern that represents indecision in the market and is used primarily for breakout trading.
It can also be called an ‘inside candle formation’ as one candle forms inside the previous candle’s range, from high to low.
- A Bullish Harami is a basic candlestick chart pattern indicating that a bearish trend in the market may be reversing.
A bullish harami forms when a buyer candle’s high to low range develops within the high and low range of a previous seller candle. As there has been no continuation to form a new low, the bullish harami represents indecision in the market which could lead to a breakout to the upside.
- And a Bearish Harami is indicating that a bullish trend in the market may be reversing.
A bearish harami forms when a seller candle’s high to low range develops within the high and low range of a previous buyer candle. As there has been no continuation to form a new high, the bearish harami represents indecision in the market which could lead to a breakout to the downside.
Here are some examples of bullish and bearish harami patterns that form over a period of time:
- There is a clear downtrend.
- The RSI provides an indication that the market is oversold. This could mean that downward momentum is bottoming but traders should wait for the RSI to cross back over the 30 line for confirmation.
- Identify a bullish harami pattern.
- Enter one pip above the high of the last candle.
- Place a stop-loss one pip below the low of the previous candle.
- Risk to Reward Ratio = 1:2 or 1:3
- If the trade has not triggered by the open of a new candle, cancel the order. If the trade has triggered leave it in the market until stop loss or target levels have been reached.
The validity of the Bullish Harami, like all other forex candlestick patterns, depends on the price action around it, indicators, where it appears in the trend and key levels of support.