CANDLESTICK PATTERNS BASICS | Engulfing Candle 📚

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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הערה:

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