Harami Inside Day Breakout

Entry Logic

• Exact entry trigger: Place a buy-stop order above the high of the Harami (mother bar) and a sell-stop order below the low of the Harami.
• Confirmation requirements: The second candle (the baby) must be completely contained within the body of the first candle (the mother). The breakout from the mother bar's range should be on high volume.
• Timeframe required: Daily chart.
• Location context: The pattern is most significant when it forms after a long trend, signaling a potential reversal or consolidation.
• Market condition requirement: A trending market that is showing signs of indecision.

Exit Logic

• Profit target(s): A measured move based on the height of the mother bar.
• Scaling out rules: N/A.
• Trailing stop rules: Use the 10-day moving average as a trailing stop.
• Exit on signal failure: If one order is triggered and the price then reverses to trigger the other order, exit immediately.
• Exit on opposite signal: A strong reversal pattern in the opposite direction of the breakout.
• Exit on time expiration: N/A.
• Exit on momentum loss: Declining volume after the breakout.

Stop Loss Structure

• Hard stop location: If long, the stop is the low of the mother bar. If short, the stop is the high of the mother bar.
• Soft stop rules: N/A.
• Maximum dollar loss per trade: 1% of capital.
• Maximum percent loss per trade: N/A.
• Structural stop placement: The stop is placed on the other side of the Harami pattern.

Risk Management Framework

• Risk per trade: 1%.
• Maximum daily loss limit: 2%.
• Maximum weekly loss limit: 5%.
• Maximum drawdown allowed: 15%.
• Risk-reward ratio requirement: 1:2.

Position Sizing Model

• Recommended sizing approach: Size based on the height of the mother bar.
• Volatility-based adjustment: N/A.
• Conviction-based sizing (A+/A/B setup): A+ for a Harami at a major weekly support/resistance. A for a Harami at a daily level. B for a Harami at an intraday level.
• Scaling in rules: N/A.
• Scaling out rules: N/A.

Trade Filtering

• Market conditions to avoid: Choppy markets.
• Specific setups required: A clear Harami pattern.
• Stock/instrument requirements: Any liquid instrument.
• Time of day restrictions: N/A.
• Chop/news avoidance rules: N/A.

Context Framework

• Trend direction assessment: The trade is taken in the direction of the breakout.
• VWAP relationship: N/A (daily chart).
• Moving average relationship: The pattern can signal a reversal at a key moving average.
• Range location: Can occur anywhere.
• Higher timeframe alignment: The breakout should align with the weekly trend.

Trade Management Rules

• When to move stop to breakeven: After a 1R move.
• When to scale out: N/A.
• When to add size: N/A.
• How to handle fast moves vs slow moves: Let it run.

Time Rules

• Optimal trading window: N/A.
• Times to avoid: N/A.
• Session-specific notes: N/A.

Setup Classification

• A+ setup criteria: A small baby bar inside a large mother bar at a major S/R level, with a high-volume breakout.
• A setup criteria: A Harami of average size at a minor S/R level.
• B setup criteria: A large baby bar.
• C setup criteria (avoid): A Harami in a choppy market.

Market Selection Criteria

• Instrument requirements: Any liquid instrument.
• Volume/liquidity requirements: High volume on the breakout.
• Volatility requirements: N/A.

Statistical Edge Metrics

• Expected win rate: 50-55%
• Average win size: 2.5R
• Average loss size: 1R
• Profit factor: 1.3 - 1.5
• Expectancy per trade: 0.25R.

Failure Conditions

• Market conditions where strategy fails: In non-trending, choppy markets.
• Specific scenarios to avoid: A series of multiple inside bars.

Psychological Rules

• Key mental discipline requirements: The ability to act quickly on the breakout.

Advanced Components

• Market regime detection: N/A.
• Volatility/liquidity filters: N/A.
• Correlation filters: N/A.
• Multi-timeframe alignment: The breakout should be in the direction of the weekly trend.

Location

• Where this setup is strongest: After a sustained trend.
• Where this setup is weakest: In a range-bound market.
• Location changes outcome: Yes.