Bullish Harami Candlestick Pattern: The Ultimate Guide to Spotting Trend Reversals

You’re staring at your trading screen.

Red candles everywhere.

Your portfolio’s bleeding.

Then you spot it – a small green candle sitting inside yesterday’s massive red one.

Is this the bullish harami candlestick pattern you’ve been hearing about?

Let me tell you what happened to me last month.

I was down 15% on my Reliance Industries position.

The stock had been falling for weeks.

Then I saw this exact pattern forming.

I bought more shares.

Three days later, I was up 8%.

That’s the power of understanding candlestick patterns properly.

What Is a Bullish Harami Pattern?

The bullish harami is like a pregnant woman.

No, seriously.

“Harami” means pregnant in Japanese.

The pattern shows a large bearish candle followed by a smaller bullish candle that fits completely inside the previous candle’s body.

Think of it as the market taking a breather.

The sellers exhausted themselves with that big red candle.

Now the buyers are quietly stepping in.

Key Components of the Pattern

First Candle (Mother Candle):

• Large bearish candle
• Shows strong selling pressure
• Creates the “body” that contains the next candle

Second Candle (Baby Candle):

• Smaller bullish candle
• Opens below the previous close
• Closes above the previous close
• Must fit entirely within the first candle’s body

The psychology is simple.

After heavy selling, the market finds some support.

Buyers aren’t aggressive yet.

But they’re testing the waters.

How to Identify a Valid Bullish Harami

I’ve seen traders get this wrong countless times.

They see any small green candle after a red one and call it a harami.

That’s not how it works.

The 5-Point Checklist

1. Downtrend Context

• The pattern must appear during a downward price movement
• At least 3-4 red candles before the pattern
• Clear bearish momentum

2. Large Bearish Mother Candle

• The first candle should be significantly larger than recent candles
• Strong volume on this candle adds confirmation
• Shows definitive selling pressure

3. Small Bullish Baby Candle

• Second candle must be bullish (close higher than open)
• Completely contained within the first candle’s real body
• Smaller size shows reduced selling momentum

4. Gap Down Opening

• The second candle should open lower than the first candle’s close
• This gap shows initial continued bearish sentiment
• The recovery during the day is what matters

5. Volume Confirmation

• Higher volume on the mother candle
• Lower volume on the baby candle is actually preferred
• Shows selling pressure is diminishing

I remember trading Tata Steel last year.

The stock dropped 12% in one day on massive volume.

Next day, it opened 3% lower but closed 1% higher on half the volume.

Perfect bullish harami.

I bought the next morning.

Made 18% in two weeks.

The Psychology Behind Bullish Harami Formations

Markets are emotional.

Every candle tells a story.

The bullish harami tells the story of shifting momentum.

Day 1: Panic Selling

The bears are in complete control.

Maybe there’s bad news.

Maybe it’s just technical selling.

Doesn’t matter.

Fear drives massive selling.

Price gaps down and stays down all day.

Day 2: Testing Support

The bears try to continue the selling.

They gap the price down again.

But something’s different.

The selling pressure isn’t as strong.

By the end of the day, buyers have stepped in.

Not aggressively.

Just enough to close higher than they opened.

What This Means

The bulls aren’t ready to charge yet.

But the bears are getting tired.

This is the first sign that momentum might be shifting.

Smart money starts accumulating quietly.

Retail traders are still scared.

Perfect setup for what comes next.

Bullish Harami vs Other Candlestick Patterns

People always confuse the harami with other patterns.

Let me clear this up.

Bullish Harami vs Hammer

Hammer:

• Single candle pattern
• Long lower shadow
• Small real body at the top
• Shows rejection of lower prices

Bullish Harami:

• Two candle pattern
• Second candle contained within first
• Shows momentum shift over time

Bullish Harami vs Engulfing Pattern

Bullish Engulfing:

• Second candle completely engulfs the first
• More aggressive bullish signal
• Shows immediate momentum shift

Bullish Harami:

• Second candle sits inside the first
• More subtle signal
• Shows gradual momentum shift

Bullish Harami vs Morning Star

Morning Star:

• Three candle pattern
• Gap down, small candle, gap up
• More complex formation

Bullish Harami:

• Two candle pattern
• Simpler to identify
• More frequent occurrence

The harami is more conservative.

It doesn’t promise explosive moves.

But it’s more reliable for consistent profits.

My 3-Step Trading Strategy for Bullish Harami

I’ve traded this pattern for 8 years.

Tried every variation.

This strategy works.

Step 1: Pattern Recognition (The Hunt)

Wait for the Setup:

• Identify clear downtrend
• Look for large volume red candle
• Spot the contained green candle

Confirm the Context:

• Check support levels nearby
• Ensure you’re not in a sideways market
• Verify the downtrend has substance

Quality Check:

• Is the mother candle really big?
• Is the baby candle really contained?
• Does volume support the story?

Step 2: Entry Strategy (The Execution)

Entry Point Options:

Option A – Aggressive Entry:

• Buy at the close of the baby candle
• Higher risk, higher reward
• Works best in strong trending markets

Option B – Conservative Entry:

• Wait for the next candle to break above the baby candle’s high
• Lower risk, confirmed momentum
• My preferred method

Position Sizing:

• Never risk more than 2% of your account
• Use smaller size if the pattern is marginal
• Scale in if you get multiple confirmations

Step 3: Risk Management (The Survival)

Stop Loss Placement:

• Below the mother candle’s low
• This invalidates the pattern if hit
• Non-negotiable rule

Take Profit Strategy:

Target 1 (50% position):

• Previous resistance level
• Usually 2-3% move
• Lock in some profits

Target 2 (30% position):

• Next major resistance
• Could be 5-8% move
• Let winners run

Target 3 (20% position):

• Trail with moving averages
• Capture big moves
• Sometimes 15-20% winners

Real Examples from Indian Markets

Let me share three real trades that show you how this works.

Example 1: HDFC Bank (March 2024)

The stock was falling after RBI concerns about credit growth.

Day 1: Massive red candle, down 6% on huge volume.

Day 2: Opened 2% lower, closed 1% higher.

Perfect bullish harami.

I bought the next morning when it broke above the previous day’s high.

Stop loss below the mother candle’s low.

Made 12% in three weeks.

Example 2: Infosys (August 2024)

IT sector was under pressure from US recession fears.

Day 1: Infosys dropped 8% after guidance cut.

Day 2: Small green candle, perfectly contained.

Volume was 40% lower than the previous day.

Classic harami setup.

Bought on the breakout.

Booked 7% profit at resistance.

Example 3: Maruti Suzuki (October 2024)

Auto sector selling due to festival season concerns.

Day 1: Maruti fell 4% on sector rotation.

Day 2: Small recovery candle inside the previous day’s range.

I bought this one too early – at the close of day 2.

Stock chopped around for a week before moving up.

Still made 9%, but learned patience is key.

Advanced Tips for Trading Bullish Harami

After thousands of trades, here’s what separates winners from losers.

Tip 1: Context Is Everything

Best Setups:

• Pattern forms near major support levels
• Stock has fallen 10-20% from recent highs
• Sector rotation rather than fundamental problems
• Market is in overall uptrend

Avoid These:

• Patterns in sideways markets
• Stocks with fundamental issues
• Market in strong bear trend
• Low volume throughout

Tip 2: Multiple Timeframe Analysis

I always check three timeframes:

Daily Chart:

• Main pattern identification
• Primary trading decision

Weekly Chart:

• Confirm overall trend
• Identify major support/resistance

4-Hour Chart:

• Fine-tune entry timing
• Better risk management

If all three timeframes align, the probability jumps significantly.

Tip 3: Combine with Technical Indicators

RSI (Relative Strength Index):

• Look for oversold readings (below 30)
• Bullish divergence adds strength
• Reset above 50 confirms momentum shift

Moving Averages:

• Pattern near 50-day or 200-day MA is stronger
• Wait for price to reclaim key averages
• Use them for trailing stops

Volume Analysis:

• Decreasing volume on down days is bullish
• Increasing volume on up days confirms interest
• Watch for institutional buying patterns

Tip 4: Market Timing Matters

Best Times to Trade Harami:

• Monday mornings (weekend effect)
• After earnings season volatility
• During sector rotation phases
• Before major events (budget, policy announcements)

Worst Times:

• During strong trending markets
• Low volume holiday periods
• Around major news events
• Month-end window dressing

Common Mistakes to Avoid

I’ve made every mistake in the book.

Save yourself the pain.

Mistake 1: Trading Every Harami

Not all haramis are created equal.

I used to jump on every pattern I saw.

Lost money on weak setups.

Now I’m selective.

Quality over quantity always wins.

Mistake 2: Ignoring the Broader Market

Individual patterns don’t exist in vacuum.

If Nifty is crashing 3%, your bullish harami won’t save you.

Check market context first.

Trade with the tide, not against it.

Mistake 3: Poor Risk Management

“This pattern looks so good, I’ll risk 5%.”

Famous last words.

Stick to your rules.

2% maximum risk per trade.

No exceptions.

Mistake 4: Impatient Exits

The pattern works over days or weeks.

Not hours.

Give it time to develop.

Don’t book profits at the first 1% move.

Let the trend develop.

Mistake 5: Forcing the Pattern

When you’re looking for something, you’ll find it.

Even when it’s not there.

A slightly larger second candle isn’t a harami.

Be strict with your criteria.

Sector-Specific Considerations

Different sectors behave differently with harami patterns.

Banking Stocks

Banks love harami patterns.

They’re heavily traded.

Lots of institutional money.

Clear support and resistance levels.

Success rate: About 70% in my experience.

Best Banks for Harami Trading:

• HDFC Bank
• ICICI Bank
• Axis Bank
• Kotak Mahindra

IT Stocks

More volatile than banks.

Patterns work well but moves can be bigger.

Watch US market cues closely.

Success rate: Around 65%.

IT Favorites:

• TCS
• Infosys
• Wipro
• HCL Tech

FMCG Stocks

Slower moving.

Patterns take longer to play out.

But when they work, trends last longer.

Success rate: About 75%.

Auto Stocks

Seasonal considerations matter.

Festival season patterns are stronger.

Monsoon effects on two-wheeler stocks.

Success rate: Around 60%.

Building Your Harami Trading Plan

Here’s the framework I use.

Steal it.

Daily Routine

Morning (9:00 AM):

• Scan for harami patterns from previous day
• Check overnight news for your watchlist stocks
• Review market sentiment indicators

Pre-Market (9:10 AM):

• Set alerts for potential breakout levels
• Plan position sizes for each opportunity
• Review support/resistance levels

Market Hours:

• Execute trades only on confirmed breakouts
• Monitor positions for any invalidation signals
• Adjust stops based on intraday action

Evening:

• Review the day’s performance
• Update watchlist for tomorrow
• Plan tomorrow’s potential trades

Weekly Review

Every Sunday, I spend 2 hours reviewing:

• Which harami patterns worked and why
• Which ones failed and the reasons
• Market conditions that favored success
• Adjustments needed in strategy

This review process improved my success rate from 55% to 72%.

Monthly Performance Analysis

Track These Metrics:

• Win rate on harami trades
• Average profit per winning trade
• Average loss per losing trade
• Risk-reward ratio achieved
• Best and worst performing sectors

Data doesn’t lie.

Your emotions do.

Technology Tools for Harami Trading

You don’t need fancy software.

But these tools help.

Screening Tools

Zerodha Kite Scanner:

• Free with Zerodha account
• Custom pattern alerts
• Real-time scanning

TradingView:

• Best charting platform
• Custom pattern recognition scripts
• Community shared strategies

ChartInk:

• Indian market specific
• Pattern-based screens
• Easy to use interface

Alert Systems

Set up alerts for:

• Potential harami formations
• Breakout levels
• Stop loss triggers
• Take profit targets

I use TradingView alerts sent to my phone.

Never miss an opportunity.

Portfolio Tracking

Google Sheets Template:

• Trade entry details
• Exit points and profits
• Pattern success rates
• Notes for improvement

Track everything.

What gets measured gets improved.

Risk Management for Harami Trading

This is where most traders fail.

They nail the pattern identification.

They time the entry perfectly.

Then they screw up the risk management.

Position Sizing Formula

I use this simple formula:

Position Size = (Account Risk × Total Capital) ÷ (Entry Price – Stop Loss)

If my account is ₹10 lakhs:

• I risk 2% = ₹20,000 per trade
• Entry at ₹500, stop at ₹480
• Position size = ₹20,000 ÷ ₹20 = 1,000 shares

Simple math saves accounts.

The 2% Rule

Never risk more than 2% of your capital on any single trade.

I don’t care how perfect the setup looks.

I don’t care if your uncle’s friend made 50% last week.

Stick to 2%.

This rule has saved me more money than any pattern ever made me.

Correlation Risk

Don’t trade harami patterns in correlated stocks simultaneously.

If you’re long HDFC Bank on a harami, don’t also buy ICICI Bank on another harami.

When banking sector falls, both trades fail together.

Diversify across sectors, not within sectors.

Market Conditions That Favor Bullish Harami

Patterns don’t work in isolation.

Market environment matters hugely.

Ideal Market Conditions

Trending Bull Market:

• Overall uptrend with periodic pullbacks
• Harami patterns mark end of corrections
• Highest success rate environment

Range-Bound Market:

• Pattern forms near support zones
• Reliable bounces from key levels
• Moderate success rates

Early Bear Market Recovery:

• After major market decline
• First signs of accumulation
• Can lead to significant rallies

Conditions to Avoid

Strong Bear Market:

• Every bounce gets sold
• Patterns fail frequently
• Wait for market stabilization

Low Volume Periods:

• Holiday seasons
• Summer months
• Patterns lack conviction

High Volatility Events:

• Earnings season
• Policy announcements
• Global crisis periods

Psychological Aspects of Harami Trading

Trading isn’t just about patterns.

It’s about managing your emotions.

The Patience Game

Harami patterns test your patience twice:

First Test: Waiting for the right setup

• Most patterns you see aren’t worth trading
• Quality setups come maybe 2-3 times per month
• FOMO kills more accounts than bad patterns

Second Test: Holding the position

• Pattern takes time to develop
• Market will test your conviction
• Exit too early, miss the big move

Dealing with False Signals

You’ll get fooled sometimes.

I get fooled sometimes.

Everyone gets fooled sometimes.

The key is cutting losses quickly when the pattern fails.

Pattern Failure Signals:

• Price closes below the mother candle’s low
• Volume spikes on selling
• Broader market turns decisively bearish

When you see these, exit immediately.

No ego, no hope, no prayers.

Just exit.

Building Confidence

Start small when learning.

Trade with money you can afford to lose completely.

Track every trade.

Build your database of what works.

Confidence comes from competence.

Competence comes from practice.

Advanced Harami Strategies

Once you master the basics, these variations can improve results.

The Harami Cross

Sometimes the second candle is a doji (open equals close).

This is called a harami cross.

Even more powerful than regular harami.

Shows complete indecision after strong selling.

Often leads to sharp reversals.

Multiple Harami Patterns

Sometimes you get harami patterns on different timeframes simultaneously.

Daily harami + weekly harami = high probability setup.

I size these trades larger (but still within risk limits).

Harami at Key Levels

Fibonacci Retracements:

• 50% or 61.8% levels
• Pattern at these levels more reliable
• Confluence of technical factors

Previous Support/Resistance:

• Old resistance becomes new support
• Harami at these levels shows respect for key levels
• Institutional memory at work

Moving Average Support:

• 50-day or 200-day moving averages
• Dynamic support levels
• Algorithmic trading creates reliable bounces

Common Questions About Bullish Harami Trading

“How long do I hold harami-based positions?”

Depends on your timeframe and target.

For swing trading: 1-3 weeks typically.

For position trading: 1-3 months.

Let the trend tell you when to exit.

Don’t impose arbitrary time limits.

“What if the pattern forms but market gaps down next day?”

This happens.

Market news can override technical patterns.

Your stop loss protects you.

Take the loss and move on.

No pattern works 100% of the time.

“Should I trade harami in options or stocks?”

I prefer stocks for harami trading.

Options add time decay risk.

Harami patterns can take time to develop.

Time decay works against you in options.

Stick to stocks unless you’re very experienced with options.

“What about intraday harami patterns?”

They work on intraday charts too.

15-minute and 30-minute charts show good patterns.

But success rate is lower.

More noise, more false signals.

I focus on daily charts for consistency.

Technology and Automation

You can automate parts of your harami strategy.

But don’t automate everything.

What to Automate

Screening:

• Daily scans for potential patterns
• Alert systems for setups
• Volume and price filters

Risk Management:

• Automatic stop losses
• Position sizing calculators
• Portfolio risk monitors

What to Keep Manual

Pattern Quality Assessment:

• Market context evaluation
• News impact analysis
• Intuitive pattern strength

Entry Timing:

• Market sentiment reading
• Intraday price action
• Confirmation signals

The best traders combine systematic approaches with discretionary judgment.

Building Your Watchlist

Not all stocks are good for harami trading.

Some stocks respect technical patterns.

Others ignore them completely.

Best Stock Characteristics

High Liquidity:

• Easy entry and exit
• Tight spreads
• Institutional interest

Clean Charts:

• Clear support and resistance
• Respect for technical levels
• Predictable behavior patterns

Fundamental Strength:

• Good business model
• Strong management
• Growing market share

My Personal Watchlist

Banking (30% allocation):

• HDFC Bank
• ICICI Bank
• Kotak Mahindra Bank

IT (25% allocation):

• TCS
• Infosys
• Tech Mahindra

FMCG (20% allocation):

• Hindustan Unilever
• Nestle India
• Britannia

Auto (15% allocation):

• Maruti Suzuki
• Mahindra & Mahindra
• Bajaj Auto

Pharma (10% allocation):

• Dr. Reddy’s
• Cipla
• Lupin

This gives me 15 high-quality stocks to monitor.

Enough opportunities without analysis paralysis.

The Long-Term Perspective

Harami trading isn’t a get-rich-quick scheme.

It’s a skill that compounds over time.

Year 1: Learning Phase

Expect to break even.

Focus on:

• Pattern recognition accuracy
• Risk management discipline
• Emotional control development

Don’t chase big profits yet.

Year 2-3: Skill Development

Start seeing consistent profits.

Refine your strategy based on experience.

Develop intuition for market conditions.

Year 3+: Mastery Phase

The pattern becomes second nature.

You start seeing setups others miss.

Consistent monthly returns become the norm.

This is when the real money is made.

Building Wealth Through Harami Trading

Conservative Approach:

• 15-20 trades per year
• 65% win rate
• 1.5:1 risk-reward ratio
• Annual return: 20-25%

Aggressive Approach:

• 30-40 trades per year
• 60% win rate
• 2:1 risk-reward ratio
• Annual return: 35-45%

I prefer the conservative approach.

Sleep better at night.

Compound returns over decades.

Frequently Asked Questions

The bullish harami candlestick pattern has been my bread and butter for years because it represents something simple yet powerful – the moment when fear starts giving way to hope in the market, and smart traders who recognize this shift can position themselves for the inevitable bounce that follows.

📊 Popular Candlestick Patterns

Pattern Name	Type
Bearish Kicker	Bearish Reversal
Hanging Man	Bearish Reversal
Three Inside Down	Bearish Reversal
Gravestone Doji	Bearish Reversal
Piercing Line	Bullish Reversal
Bullish Kicker	Bullish Reversal
Bearish Engulfing	Bearish Reversal
Long-Legged Doji	Neutral/Reversal
Tweezer Bottom	Bullish Reversal
Dark Cloud Cover	Bearish Reversal
Doji	Neutral/Reversal
Bullish Harami	Bullish Reversal
Bearish Spinning Top	Bearish Reversal
Dragonfly Doji	Bullish Reversal
Three Outside Up	Bullish Reversal
Bullish Engulfing	Bullish Reversal