The harami (and its cousin, the inside bar) is the visual opposite of an engulfing pattern: the second candle is small and sits inside the range of the first candle.
- It shows contraction — the previous momentum is losing strength.
- It is often a pause before a continuation or a reversal; the direction is decided by a break of the mother candle's range.
How to use it
Many traders wait for price to break the mother candle's high/low as the trigger, with the stop on the opposite side of the mother candle.
Key points
- Harami/inside bar = compression, not a standalone directional signal.
- The break of the mother candle's range is what decides.
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