You know what keeps most traders up at night?
The fear of missing that perfect reversal signal.
The anxiety of watching their portfolio bleed because they couldn’t spot when the trend was about to flip.
I get it.
I’ve been there too.
Staring at charts for hours, wondering if that small candle after a big move actually means something.
Well, let me tell you about the Harami Cross candlestick pattern – one of the most reliable reversal signals I’ve seen in my trading journey.
What is Harami Cross Pattern?
Picture this scenario.
You’re watching a strong uptrend.
Bulls are in complete control.
Then suddenly, a tiny doji appears right inside the previous candle’s body.
That’s your Harami Cross.
The word “Harami” comes from Japanese, meaning “pregnant.”
And honestly, that’s exactly what it looks like.
A big mother candle with a small baby doji inside.
Here’s what makes it special:
- The first candle – Large body showing strong directional movement
- The second candle – Small doji completely contained within the first candle’s body
- The position – Second candle’s high and low must stay within first candle’s range
Think of it as the market taking a breather.
After a strong move in one direction, traders start having second thoughts.
The doji shows indecision.
And that indecision often leads to reversal.
Types of Harami Cross Patterns
Not all Harami Cross patterns are created equal.
Let me break down the two main types I watch for:
Bullish Harami Cross
This appears after a downtrend.
You’ll see:
- Long red candle showing strong selling pressure
- Small doji forming inside the red candle’s body
- Market sentiment shifting from bearish to uncertain
I remember this one trade in RELIANCE.
Stock was falling for weeks.
Then boom – perfect bullish Harami Cross appeared.
Next three days, stock gained 8%.
Bearish Harami Cross
This shows up after an uptrend.
Key characteristics:
- Long green candle displaying strong buying momentum
- Small doji contained within the green candle
- Buyer exhaustion becoming visible
Last month, I spotted this in HDFC Bank.
Stock had been climbing for days.
Then a beautiful bearish Harami Cross formed.
Two days later, it dropped 6%.
How to Identify Harami Cross on Charts
Most traders miss these patterns because they don’t know what to look for.
Here’s my step-by-step process:
Step 1: Find the Trend
You need a clear trend first.
At least 3-4 candles moving in the same direction.
No trend = no Harami Cross signal.
Step 2: Spot the Large Candle
Look for a candle with:
- Strong body (not tiny)
- Clear direction (green for up, red for down)
- Good volume backing the move
Step 3: Identify the Doji
The second candle must be:
- Doji formation (open and close nearly equal)
- Completely inside the first candle’s body
- Smaller in size compared to the first candle
Step 4: Check the Context
Ask yourself:
- Is this at a key support/resistance level?
- Has the trend been going for a while?
- Are other indicators showing divergence?
Context is everything in trading.
Harami Cross Trading Strategy
Now comes the fun part.
How do you actually trade these patterns?
Entry Strategy
I never enter immediately when I see the pattern.
Here’s what I do instead:
For Bullish Harami Cross:
- Wait for the next candle to close above the doji’s high
- This confirms buying interest is returning
- Enter long position with proper risk management
For Bearish Harami Cross:
- Wait for the next candle to close below the doji’s low
- This confirms selling pressure is building
- Enter short position with defined stop loss
Stop Loss Placement
Your stop loss is your lifeline.
Don’t mess this up.
For long trades:
- Place stop below the low of the Harami Cross pattern
- This gives the trade room to breathe
- Usually 1-2% below the pattern low
For short trades:
- Place stop above the high of the Harami Cross pattern
- Protects against false breakouts
- Keep it tight but reasonable
Target Setting
I use a simple 2:1 risk-reward ratio.
If I’m risking ₹100, I’m targeting ₹200 profit.
But here’s the thing.
I also watch for:
- Previous support/resistance levels
- Fibonacci retracement levels
- Moving average confluence
These become my profit-taking zones.
Best Time Frames for Harami Cross
Time frame matters more than you think.
Daily Charts
This is my favorite.
Daily Harami Cross patterns carry more weight.
They represent real institutional decision-making.
Retail traders can’t fake these moves.
4-Hour Charts
Good for swing trading.
Patterns complete faster.
But you need to be more selective.
Not every 4-hour Harami Cross is worth trading.
1-Hour Charts
Only for day traders.
Patterns happen frequently.
But success rate drops significantly.
You’ll get more signals but lower quality.
Combining Harami Cross with Other Indicators
Smart traders never rely on just one signal.
Here’s how I combine Harami Cross with other tools:
RSI Divergence
When I see a Harami Cross pattern forming, I immediately check RSI.
If RSI is showing divergence from price, the signal becomes much stronger.
Example:
- Price making new highs
- RSI making lower highs
- Bearish Harami Cross appears
- This is a high-probability setup
Support and Resistance
Location matters.
A Harami Cross at major support/resistance carries 10x more weight than one in the middle of nowhere.
I mark these levels on my charts:
- Previous swing highs/lows
- Round numbers (₹100, ₹500, ₹1000)
- Psychological levels
Volume Analysis
Volume tells the real story.
For a valid Harami Cross:
- First candle should have above-average volume
- Doji candle typically has lower volume
- Confirmation candle needs volume surge
No volume = no conviction = no trade.
Common Mistakes When Trading Harami Cross
I’ve made every mistake in the book.
Let me save you some pain:
Mistake #1: Trading Without Confirmation
Never enter on the doji candle itself.
Wait for the third candle to confirm the pattern.
Patience pays in trading.
Mistake #2: Ignoring the Overall Trend
A bullish Harami Cross in a strong downtrend is like swimming against a tsunami.
Don’t fight the bigger picture.
Mistake #3: Poor Risk Management
Your position size should reflect the pattern’s reliability.
Stronger setups = larger positions.
Weaker setups = smaller positions.
Never risk more than 2% of your capital on any single trade.
Mistake #4: Setting Unrealistic Targets
The market doesn’t owe you massive profits.
Take what it gives you.
Sometimes a 1:1 risk-reward is better than holding for 3:1 and getting stopped out.
Real Trading Examples
Let me share some actual trades where Harami Cross saved my portfolio:
Example 1: TATA Motors (March 2024)
Stock was in a strong downtrend.
Trading around ₹450 levels.
Then I spotted a textbook bullish Harami Cross.
What I did:
- Waited for confirmation above ₹460
- Entered long with stop at ₹445
- Target set at ₹490
Result: Stock hit my target in 5 trading days.
₹30 profit per share with ₹15 risk.
Perfect 2:1 trade.
Example 2: HDFC Bank (July 2024)
Bank was rallying hard.
Hit ₹1650 and formed a bearish Harami Cross.
My approach:
- Waited for break below ₹1640
- Entered short with stop at ₹1665
- Target at ₹1590
Outcome: Made ₹50 per share in 3 days.
Sometimes the simplest patterns work best.
Market Conditions That Favor Harami Cross
Not every market environment is perfect for this pattern.
When It Works Best:
Trending Markets:
- Clear directional bias exists
- Momentum starts showing signs of exhaustion
- Volume supports the initial move
Near Key Levels:
- Major support/resistance zones
- Fibonacci retracements
- Moving average confluences
When to Avoid:
Sideways Markets:
- No clear trend to reverse
- Signals become unreliable
- Better to wait for breakout
Low Volume Periods:
- Holiday seasons
- Pre-announcement periods
- Market opening/closing times
Psychology Behind Harami Cross Pattern
Understanding market psychology makes you a better trader.
Here’s what’s happening inside traders’ minds:
During the First Candle:
Emotions are running high.
Bulls or bears are in complete control.
FOMO is driving decisions.
Everyone wants to jump on the trend.
During the Doji Formation:
Doubt creeps in.
Early movers start booking profits.
New participants hesitate to enter.
Market reaches a temporary equilibrium.
After the Pattern:
Smart money makes their move.
Retail traders are still confused.
This creates the reversal opportunity.
Advanced Harami Cross Techniques
Once you master the basics, try these advanced methods:
Multiple Time Frame Analysis
I always check higher time frames.
If daily chart shows bullish Harami Cross, but weekly is still bearish, I’m more cautious.
Alignment across time frames increases success probability.
Sector Rotation Plays
Sometimes entire sectors show Harami Cross patterns.
When IT stocks collectively form bearish Harami Cross, it might signal sector rotation.
This gives you broader market insight.
Options Strategies
You can use Harami Cross for options trading too.
For bullish patterns:
- Buy call options
- Sell put spreads
- Time decay works in your favor
For bearish patterns:
- Buy put options
- Sell call spreads
- Profit from downward movement
Harami Cross vs Other Candlestick Patterns
How does it compare to other reversal patterns?
Harami Cross vs Hammer
Harami Cross:
- Two-candle pattern
- Shows indecision clearly
- Higher reliability in trending markets
Hammer:
- Single candle pattern
- Indicates buying at lows
- Works better in oversold conditions
Harami Cross vs Engulfing
Harami Cross:
- Conservative signal
- Requires confirmation
- Lower false signals
Engulfing:
- Aggressive signal
- Immediate reversal indication
- Higher false signal rate
I prefer Harami Cross for its reliability.
Better to be right 70% of the time than wrong 60% of the time.
Risk Management with Harami Cross
Risk management isn’t just about stop losses.
It’s about preserving capital for the next opportunity.
Position Sizing
Never risk more than you can afford to lose.
My rule: 2% maximum risk per trade.
If my account is ₹5 lakhs, maximum risk is ₹10,000.
This keeps you in the game longer.
Portfolio Correlation
Don’t take multiple Harami Cross trades in correlated stocks.
If you’re long on HDFC Bank, avoid ICICI Bank trades.
Diversification protects your downside.
Market Conditions Assessment
Some days, patterns just don’t work.
High volatility events like:
- Budget announcements
- RBI policy meetings
- Global market crashes
Stay away during these periods.
Technology Tools for Pattern Recognition
Manual pattern spotting takes forever.
Here are tools that help:
Trading Platforms
Zerodha Kite:
- Built-in pattern recognition
- Easy to spot formations
- Good for beginners
TradingView:
- Advanced charting tools
- Custom pattern alerts
- Professional-grade analysis
Mobile Apps
Investing.com:
- Real-time pattern alerts
- Multiple time frame analysis
- Free to use
ChartIQ:
- Automated pattern detection
- Backtesting capabilities
- Subscription-based
Technology makes pattern trading scalable.
But never let it replace your market understanding.
Backtesting Your Harami Cross Strategy
Before risking real money, test your strategy.
Historical Analysis
Pick 50 random Harami Cross patterns from the past year.
Track:
- Success rate (how many worked)
- Average profit per winning trade
- Average loss per losing trade
- Time to target achievement
Paper Trading
Practice with virtual money first.
Most platforms offer paper trading features.
Trade for at least 3 months before going live.
This builds confidence and refines your approach.
Common Questions About Harami Cross
Q: How reliable is the Harami Cross pattern?
From my experience, it works about 65-70% of the time when properly filtered.
That’s pretty good for any trading pattern.
But reliability depends on:
- Market conditions
- Time frame used
- Confirmation requirements
- Overall trend context
Q: Can I use Harami Cross in intraday trading?
Yes, but be careful.
Intraday patterns have lower reliability.
You’ll get more signals but higher failure rate.
Stick to longer time frames if you’re starting out.
Q: What’s the difference between Harami and Harami Cross?
Regular Harami has any small candle inside the first candle.
Harami Cross specifically requires a doji as the second candle.
The doji shows more indecision, making it a stronger signal.
Q: Should I trade Harami Cross in all market conditions?
No way.
Avoid during:
- Major news events
- Low volume periods
- Highly volatile markets
- Earnings seasons
Pattern trading works best in normal market conditions.
Q: How do I set profit targets for Harami Cross trades?
I use multiple approaches:
- Fixed risk-reward (usually 2:1)
- Technical levels (support/resistance)
- Trailing stops for trending moves
- Partial profit booking at key levels
Choose what fits your trading style.
Q: Can Harami Cross patterns fail?
Absolutely.
No pattern works 100% of the time.
That’s why we use:
- Proper stop losses
- Position sizing
- Confirmation signals
- Risk management rules
Expect failures and plan for them.
Q: What time frame gives the best Harami Cross signals?
Daily charts are my go-to.
They filter out most of the noise.
But I also watch:
- Weekly charts for major reversals
- 4-hour charts for swing trades
- 1-hour charts for day trading (rarely)
Start with daily and work your way down.
Q: How do I avoid false Harami Cross signals?
Use additional filters:
- Volume confirmation
- RSI divergence
- Support/resistance levels
- Overall market trend
The more boxes you tick, the better your odds.
Q: Should I trade Harami Cross during earnings season?
I avoid it completely.
Earnings can cause gap movements that invalidate technical patterns.
Wait for normal market conditions.
Your capital will thank you.
Q: What’s the best risk-reward ratio for Harami Cross trades?
I aim for minimum 2:1.
But sometimes I take 1.5:1 if:
- Pattern is at major level
- Multiple confirmations present
- Market sentiment supports the move
Quality over quantity always wins.
Final Thoughts on Harami Cross Trading
Trading isn’t about finding the perfect pattern.
It’s about consistently applying a proven approach.
The Harami Cross candlestick pattern gives you that edge when used correctly.
Remember:
- Wait for confirmation
- Manage your risk
- Keep realistic expectations
- Learn from every trade
I’ve made thousands of trades using this pattern.
Some won big.
Some lost small.
But over time, the edge compounds.
Start small.
Practice first.
Master the basics before getting fancy.
And most importantly, never risk money you can’t afford to lose.
The market will always be there tomorrow.
Your capital might not be if you’re reckless today.
Happy trading, and may the Harami Cross candlestick pattern bring you consistent profits in your trading journey.
