CANDLESTICK PATTERNS BASICS | Engulfing Candle 📚
Updated
Hey traders,
In this educational post, I want to discuss with you one of the most accurate REVERSAL candlestick patterns - the engulfing candle.
On EURUSD chart, I spotted for you bullish & bearish examples of this pattern.
The logic behind this pattern is quite simple:
⭐️In a bullish trend, after a strong directional movement, the price reaches some important structure level. Growing steadily and forming a sequence of green bullish candles the price suddenly forms a strong bearish candle.
What is particular about that candle is the fact that its total range (distance from the wick high to wick low) & body range (distance from body open to body close) exceed the ranges of a previous bullish candle.
🔻Such a candle we will call a bearish engulfing candle.
Most of the time it signifies a strong spike in selling volumes and willingness of sellers to push.
With a high probability, such a formation leads to a pullback or even a trend reversal.
⭐️In a bearish trend, after a strong short rally, the price reaches some demand cluster. Instead of breaking that and going lower, the price forms a strong bullish candle.
That candle engulfs the range of the previous bearish candle & its body size exceeds the size of the previous candle.
🟢Such a candle we will call a bullish engulfing candle.
Quite often such a formation leads to a pullback or even a trend reversal.
🔔And there is just one single tip that will dramatically increase your performance trading the engulfing candle:
It is recommended to rely on this pattern ONLY IF it is formed on a key level:
❗️Bullish engulfing candle must strictly form on a strong support.
❗️Bearish engulfing candle must strictly form on a strong resistance.
Forming beyond key levels, the pattern occasionally will give false signals.
⏳Preferable time frames to trade engulfing candles are daily/4h.
Learn to spot this pattern & you will see how efficient it is.
What candlestick patterns do you want to learn in the next posts?
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