Lesson 6: Harami and Inside Bars

🕯️ Candlestick Patterns in 5 Minutes · Lesson 6 of 10

In lesson 5 the star patterns showed momentum stalling with a small candle wedged between two big ones. The harami takes that same stalling idea and tightens it into just two candles.

Harami is an old Japanese word for pregnant, and that's the picture. A big candle, then a small one tucked entirely inside its body, like the big candle is carrying it. Once you see that shape you can't unsee it.

What the Harami Looks Like

The setup is two candles. The first is large and pushes in the direction of the current trend. The second is small and sits completely within the body of that first candle. Its high and low both fall inside the prior open and close.

That containment is what matters. After a candle that traveled a long way, the next one barely moves. The crowd that was driving price suddenly can't push it any further. The trend didn't reverse yet, but it ran into a wall.

A bullish harami shows up after a downtrend: a long red candle, then a small candle parked inside it. A bearish harami shows up after an uptrend: a long green candle, then a small one inside. Either way, the message is the same. The move is losing its grip.

Inside Bars Are the Same Idea

If you trade bars instead of candles, or you hear the term on a futures or forex desk, an inside bar is the close cousin of the harami. An inside bar is any bar whose entire range, high to low, fits within the prior bar's range.

The harami cares about the candle bodies. The inside bar cares about the full high-to-low range. The story they tell is identical: the market paused and coiled up inside the last bar's territory. Traders call that compression. Price is squeezing into a smaller and smaller space, and a squeeze like that usually ends with a sharp move once it breaks.

How to Confirm It

Here's the catch. A harami is a warning, not a green light. It tells you momentum stalled, but a stall can resolve either way. Price might reverse, or it might just rest for a candle and keep going. On its own the pattern is weak, and it shows up constantly.

So wait for the next candle to pick a side. With a bullish harami after a downtrend, you want the candle after the small one to close above the harami's high. That break says buyers actually showed up. With a bearish harami, you want a close below the harami's low before you trust the turn.

The same goes for inside bars. Traders watch for a break above the inside bar's high or below its low, and they treat the bar's opposite end as a natural place to put a stop. No break, no trade. A harami that never gets confirmed is just a quiet candle that meant nothing.

Next up

Two candles can hint that a trend is tiring. Three candles in a row can show momentum fully changing hands. In lesson 7 we'll cover three white soldiers and three black crows, and when those marching patterns are real versus just noise.