Our research shows Bullish Harami and Bullish Harami Cross are profitable patterns.
Based on 1,112 years of data, the Bullish Harami has an average profit per trade of 0.5% and the Harami Cross 0.58%.
I analyzed 5,624 Harami trades, spanning an impressive 1,112 years of historical data.
Dive into the fascinating world of trading the Bullish Harami pattern, supported by reliable and time-tested data.
RESEARCH SUMMARY
- The Bullish Harami Cross is the 5th most reliable candle pattern in our testing, with a win rate of 55.3%.
- The average Bullish Harami Cross winning trade is 4%, and the average profit across all trades is 0.58%.
- The Bullish Harami is less reliable, with a lower win rate of 55.2% and a profit per trade of 0.5%.
- Across 5,624 trades, a Bullish Harami Cross beats a Bullish Harami in performance and profitability.
- The Bullish Harami Cross is the only one worth trading and is a top-performing candle pattern.
What is a Harami Candle?
A Harami candle is a two-candle pattern characterized by a long candle encompassing the following smaller candle. The “Harami” phrase derives from the Japanese word that means “pregnant,” as the second candle appears to be “hiding” inside of the first one.
There are four types of Harami, the Bullish Harami, Bullish Harami Cross, Bearish Harami, and Bearish Harami Cross, all with different performance profiles, characteristics, and trading approaches.
This article will delve into the Bullish Harami and the Bullish Harami Cross.
The Harami candle has been used for centuries by traders and investors alike to help gauge whether or not a trend is likely to continue. During the Edo period in Japan, when trading was becoming increasingly popular, traders began to use the Harami pattern as an indicator of future buying or selling opportunities. Today, the Harami is used by technical analysts across all markets to identify a potential reversal in trend. It is also used to confirm an existing trend or to generate trading signals.
Bullish Harami vs. Bullish Harami Cross
The Bullish Harami is a two-candle formation composed of a larger bearish candle followed by a smaller bullish candle. It signals that the current trend may be reversing from bearish to bullish and suggests buying opportunities for traders.
The Bullish Harami Cross is similar to the Bullish Harami, but with one key difference – the second candle is not clearly bullish; it is a doji or spinning top. This second candle indicates equal buying and selling pressure, making it an indicator of a potential bullish trend reversal. Additionally, this pattern is often used to confirm existing bearish trends or generate buy signals.
Understanding the Bullish Harami
A Bullish Harami pattern is a two-candlestick chart pattern that signifies the end of a bearish trend and the potential onset of a bullish trend. The first candlestick will often be a bearish bar, indicating that the market has dropped significantly during that period. The second candle is bullish, indicating buyers have stepped in and pushed prices back up from their earlier lows.
How to Identify a Bullish Harami?
When identifying a Bullish Harami, there should be a prevailing downtrend and a bearish candle encompassing a smaller bullish candle.
- Prevailing Downtrend: The pattern occurs during a confirmed downtrend. The presence of a preceding bearish trend is crucial for the formation of a Bullish Harami.
- Two Candlesticks: The Bullish Harami consists of two candlesticks. The first is a large bearish (red) candlestick, followed by a smaller bullish (green) candlestick.
- Positioning: The second candlestick is ‘engulfed’ by the body of the first, meaning it opens and closes within the range of the previous day’s body.
- Color Contrast: The color of the second candlestick is different from the first one. The first candlestick is red (indicating a close lower than the open), while the second is green (indicating a close higher than the open).
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The trading psychology behind a Bullish Harami is key to understanding the pattern. The Bullish Harami pattern signals a potential change in market sentiment. The bearish sentiment of the first day is countered by the bullish sentiment of the second day, suggesting a possible trend reversal.
Our test data show this theory is true; the Bullish Harami is a bullish signal for the following ten trading days.
The Bullish Harami Cross
The Bullish Harami Cross pattern is similar to the Bullish Harami as it also signals a possible end to a bearish trend and the commencement of a bullish trend. While the first candle is still a bearish pattern with a significant move down, the second candle is usually a spinning top or Doji, meaning the open and close prices are similar and still contained within the bounds of the first candle.
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How to Identify a Bullish Harami Cross
When spotting a Bullish Harami Cross, there should be a downtrend and a bearish candle encompassing a smaller bullish candle with a long wick, ideally a Doji or Spinning Top.
- Prevailing Downtrend: The pattern emerges amidst a confirmed downtrend. A preceding bearish trend is a prerequisite for forming a Bullish Harami Cross.
- Three Candlesticks: The pattern comprises three candlesticks. The first is a large bearish (red) candlestick, followed by a small Doji (a candlestick with a virtually equal open and close), and then a large bullish (green) candlestick.
- Positioning: The Doji opens and closes within the range of the body of the first day’s candlestick. The third candlestick opens higher than the Doji and closes near its high, further validating the bullish reversal.
- Color Contrast: The first candlestick is red, indicating a close lower than the open. The second candlestick is a Doji, symbolizing indecision in the market. The third candlestick is green, indicating a close higher than the open, thus confirming the bullish reversal.
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The psychology behind a Bullish Harami Cross is it provides a potent signal of a change in market sentiment. The bearish sentiment of the first day is countered by the indecision of the second day (Doji) and finally overpowered by the bullish sentiment of the third day, often a gap up in price. This progression suggests a potential shift from a bearish to a bullish trend. It’s vital to wait for the additional confirmation of the third day’s gap-up before making a trading decision.
The theory suggests that the sustained bullish momentum suggests strong buyer sentiment and the potential for continued buying pressure in the subsequent trading periods. Our research shows that the Bullish Harami Cross is a signal for a positive market move.
Only one of these patterns is worth trading; the Bullish Harami Cross.
Bullish Harami Candle Testing
Using TrendSpider, I tested 30 Dow Jones Industrial stocks over a 20-year span. This amounted to 1,702 Harami trades and 588 years of data. The Harami must be fully formed to enter a trade, and the buy signal must be executed on the next trading day’s open price. Each trade was exited at the open exactly ten days later.
Candle Testing Methodology:
- Patterns: Bullish Harami & Bullish Harami Cross
- 30 DJIA Stocks
- Daily Chart
- Strategy: Buy Long
- Test Period: 2003 to 2023
- Buy at the next open
- Exit after 10 days
- Pattern Recognition performed by TrendSpider
Backtesting the Bullish Harami Candles
With TrendSpider, you can effortlessly identify and execute trades, experiencing the swift and precise results you desire. To expertly evaluate candlestick patterns and strategies on your own, kindly follow the instructions below and refer to the accompanying screenshot.
- Register for TrendSpider.
- Buy Signal: Select Strategy Tester > Entry Condition > Add Parameter > Condition > Candlestick pattern > Bullish Harami or Bullish Harami Cross > Evolved.
- Sell Signal: Add # Candles Passed = 10.
- Click “RUN” to execute the backtest.
Backtesting Done with TrendSpider
Test Results
After conducting 5,624 trades on 1121 years of data, we confirm the superior Bullish Harami Cross profit per trade to be 0.58%. A 55.3% win rate means that trading a Bullish Harami Cross long will net you an average of 0.58% profit per trade if you sell after ten days. Conversely, short-selling a Bullish Harami Cross, you should expect to lose 0.58% per trade.
Bullish Harami Cross Performance – Good
The percentage of Bullish Harami Cross winning trades was 56.1%, with an average winning trade equalling 4.0%, significantly higher than the average performance across all candlestick types. The Max Drawdown was -31.7%, versus the stock’s drawdown of -59.3%, which shows less volatility than a buy-and-hold strategy.
The average winning trade was 4.0% over ten days, and the average losing trade was -3.7%; this represents a reasonable profit margin, especially when combined with the 56.1% successful trades. The average win for all trades was 0.58% per trade.
The Bullish Harami Cross reward-to-risk ratio is 1.17, the third highest of the 25 candles we tested. We have only seen better Reward/Risk ratios in our testing of “The most successful chart patterns.”
Bullish Harami Results – Average
The Bullish Harami is less reliable than the Bullish Harami Cross. The percentage of Bullish Harami winning trades was 55.2% versus 44.8% losing trades, lower than the 55.8% average performance across all candlestick types. The Max Drawdown was -41.5%, versus the stock’s drawdown of -59.6%, which shows less volatility than a buy-and-hold strategy.
The average winning trade was 3.9% over ten days, and the average losing trade was -3.6%, suggesting razor-thin profit margins, especially when combined with the 55.2% successful trades. The average win for all trades was 0.50% per trade, which ranks the Bullish Harami 9th best in our testing.
Harami Candle Test Results Summary
Ultimately for every long trade you make after a Bullish Harami Cross appears on a daily stock chart, on average, you should make 0.58% after holding for ten days. The same trade on a Bullish Harami is 0.50%, both reasonable returns, but the Cross is better.
Performance Data Table: Bullish Harami Cross vs. Bullish Harami
Our combined testing of 1,121 years of data shows the Bullish Harami Cross outperforms the Bullish Harami by 16%. (See table below)
| Test Results | Bullish Harami Cross | Bullish Harami |
| Data Analyzed (Years) | 568.3 | 552.9 |
| # Trades | 1609 | 4015 |
| Wins | 55.3% | 55.2% |
| Losses | 44.7% | 44.8% |
| Max Drawdown | -31.7% | -41.5% |
| Max Drawdown (Asset) | -59.3% | -59.6% |
| Average Win | 4.0% | 3.9% |
| Average Loss | -3.7% | -3.6% |
| Average Return Per Trade | 0.58% | 0.50% |
| Reward/Risk Ratio | 1.17 | 1.09 |
| Sharpe Ratio | 0.01 | 0.20 |
| Sortino Ratio | 0.31 | 0.63 |
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How to Trade a Bullish Harami Based on Data
Our research confirms that you should trade the Bullish Harami Cross candle, which returns an average of 0.58% per trade, making it the 5th best-performing candle pattern. You can also trade the Bullish Harami but expect lower results over time.
Trading the Bullish Harami Cross: Apple Inc. 20-Year Test
Thanks to TrendSpider’s strategy tester, we can see the Bullish Harami Cross’s high 5.7% average winning trade on Apple Inc. The average gain across all winning and losing trades was 1.31%, which is excellent. Over 20 years, there were 64 trades, 57% profitable, with a healthy 1.24% reward/risk ratio.
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Enhancing a Harami Trading Strategy
When engaging in Harami trading, it could be even more profitable to combine this strategy with indicators our testing has proven successful, like the Relative Strength Index (RSI), Rate of Change (ROC), or Volume. Additionally, we have extensively tested traditional chart patterns and found they can be highly profitable.
By optimizing your approach with these techniques, you can enhance both the quality and effectiveness of your trading strategy. Of course, you need to test this for yourself using TrendSpider.
Is a Harami Bullish or Bearish?
According to our testing, the Bullish Harami and Bullish Harami Cross are strongly bullish patterns in the following 10 trading days. The results from 1,121 tested trades are 55% bullish and 45% bearish. The Bullish Harami Cross is the more profitable variation.
Is a Bullish Harami a Reversal Pattern?
Our data shows that a Harami is a reversal and a continuation pattern. The charts above show Haramis occur during uptrends and downtrends, but they do not exclusively signal a price reversal; they can also be continuation patterns.
Does the Bullish Harami Candle Work?
Yes, the Bullish Harami Cross works well in trading yielding a 0.58% profit across all trades. Both the Bullish Harami and Bullish Harami Cross patterns are predominantly bullish and work if you buy long.
Is a Bullish Harami Candle Accurate?
The Bullish Harami Cross is the fifth most accurate candle pattern to trade; it results in 55.3% of trades winning, averaging +4.0% per winning trade.
Can the Bullish Harami Candle be used for Buy & Sell Signals?
Yes, our data shows the Bullish Harami and Bullish Harami Cross can be used for buy and sell signals. They average a 55.25% win rate and 3.95% per winning trade across 5,624 trades.
Is a Bullish Harami Candle Reliable?
The Bullish Harami Cross proves to be the most reliable Harami pattern. Extensive analysis of 1,609 trades conducted on the 30 Dow Jones stocks over a 20-year period demonstrates an average profit of 0.58% per trade. This encompasses both winning and losing trades, solidifying its reliability as a trading tool.
Summary
In conclusion, the Bullish Harami Cross is one of the most reliable and profitable Japanese candlestick patterns. It has a good accuracy of 55.3%, resulting in a profit per trade of 0.58% and an average winning trade of 4% over 10 days. Our data proves the Bullish Harami Cross has upside predictive qualities.
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FAQ
What is the best software for Harami candle trading?
TrendSpider is the best software for trading all candlestick patterns due to its integrated backtesting and pattern recognition. If you value a social community of traders sharing ideas and strategies, then TradingView is a great alternative.
Is the Bullish Harami profitable?
Yes, the Bullish Harami Cross is among the most profitable candle patterns. Our testing shows it has an average return of 0.58% across 1,609 trades spanning 568 years of test data. So, for every 10-day trade, you should average a 0.58% profit.
What is a Bullish Harami candle?
A Bullish Harami candle is a two-candle pattern where the first candle is larger with a bearish body, and the second is smaller with a bullish body. When this occurs in an uptrend, it could signal a trend reversal, up or down.
How can I recognize Bullish Harami candles?
Bullish Harami candles form when the first candle is longer than the second. The first should be a red bearish body, meaning it has an open price higher than its close price. The second should be a green bullish body with an open price lower than its close price.
What are some strategies for trading the Bullish Harami candle?
When trading the Bullish Harami, traders can use various strategies, such as buying on the open of the third candlestick after formation or waiting for a confirmed close above the high of the second candlestick to enter long positions.
What software automatically detects Bullish Harami candles?
TrendSpider and TradingView can both detect Bullish Harami and Harami Cross patterns. We detail both platforms in our Best Candlestick Pattern Recognition Software Review.
Is the Bullish Harami candle popular?
According to Google search data, the Bullish Harami Cross candle is a popular pattern, but most traders do not know how to trade it based on the data. Traders need to know that this pattern is 55% bullish and 45%, bearish.
Is the Bullish Harami candle important in trading?
Yes, according to our research, the Bullish Harami Cross is an important candlestick pattern due to its 0.58% average trade profit and average winning trade of 4.0%.
Is the Bullish Harami Candle reliable?
Yes, the Bullish Harami patterns reliably predict market direction 56% of the time, making it good for a consistent 0.58% per trade profit. The Bullish Harami Cross is more reliable than the Bullish Harami, so we recommend the cross version.
What indicators should I use with Bullish Haramis?
In conjunction with Bullish Harami patterns, it is advisable to use indicators such as relative strength index (RSI), moving averages, and rate of change (ROC). Our research and analysis have proven these indicators successful.
