Hey Traders, Today We will know everything about Engulfing Candlestick Patterns like What is Engulfing Candlestick Pattern, the Types of Engulfing Candlestick Patterns, engulfing candle strategy, and How to Trade Engulfing Patterns. So Let’s begin…
What is Engulfing Candlestick Pattern?
Engulfing candlestick pattern is the most popular candlestick pattern. Engulfing candlestick is formed when it completely engulfs the previous candle. Engulfing candlestick pattern can engulf more than one previous candle but be considered an engulfing candlestick pattern because in Engulfing at least one candle must fully engulf.
Types of Engulfing Candlestick Pattern
There are two types of engulfing candlestick patterns.
- Bullish Engulfing Pattern
- Bearish Engulfing Pattern
#1 Bullish Engulfing Pattern
Engulfing pattern consists of two candle formations the first one is the small body and the second is the bigger board the second candle should be more fully engulfed than the previous candle this is called the bullish engulfing pattern.
Bullish Engulfing Pattern tells us that seller does not have control over the market. Now buyers will take control of the market. when a bullish engulfing pattern forms in the uptrend, It indicates a confirmation Trend. When a bullish engulfing pattern forms at the end of the downtrend, It indicates a reversal of the Trend.
In the example above you see clearly how the market reversed after the formation of the bullish engulfing pattern.
No one can predict the market so don’t try to trade the market using only one confirmation because you will need one more confirmation to increase the chances of winning our trade.
Identifying the Bullish Engulfing Pattern.
- The market is in a downtrend.
- The first candle has a small bearish candle.
- The second candle should fully engulf the previous candle.
- The second candle has a big bullish candle.
- The bullish candle may engulf one or more bodies.
#2 Bearish Engulfing Pattern
The Bearish engulfing pattern consists of two candles, the first one is a small Bullish candle and the second candle is a bigger bearish Candle than the previous bullish candle. The Second bearish candle should fully engulf the previous one or more small bodies. That is a bearish engulfing pattern.
This is what a bearish engulfing pattern looks like, as you can see on the above chart. This candlestick formation tells our buyers not to control the market, Now Sellers to take the charge of the Market.
When a bearish engulfing pattern forms in the downtrend, It indicates the contribution of the trend.
When a bearish engulfing pattern forms in the uptrend, It indicates the reversal of the trend.
Here see the example, How the market reverse the trend when it was clearly in an Uptrend.
One thing remembers, Never trade one a single confirmation. Your trade should be based on multi confirmations. The bearish engulfing pattern is a very profitable pattern but you need more confirmation to enter the trade.
Identifying the Bearish Engulfing Pattern.
- The market is in an Uptrend.
- The First Candle has a small bullish candle in an uptrend.
- The Second Candle should fully engulf the previous candle.
- The Second Candle has a big bearish candle.
- The Bearish Candle engulfs one or more bodies.
How to Trade Engulfing Pattern?
The engulfing pattern is a very profitable pattern. If you respect this three-element.
UpTrend:- If the market makes higher highs and higher lows that is called an uptrend. You can see the chart to better understand the uptrend.
DownTrend:- If the market makes higher lows and lower lows that is called a downtrend. You can see the chart to better understand the downtrend.
Sideways Trend:- If both conditions are not fulfilled then, It is a Sideways Trend.
Most traders say that The trend is your friend, and If you want to master trading the engulfing pattern, You have to know the market direction.
When you find trends in the market, the next step is to identify the important levels in the chart. It means the support & resistance levels.
If any Stock price tests a support level and stops the price. This indicates buyers are there, This support area is most important because most of the traders buy at the support level.
Conversely, If any Stock or index tests the resistance level and stop the price. This indicates sellers are there, here many traders sell because of the resistance level.
When you find a market trend and draw the support or resistance levels then If engulfing pattern forms on the support or resistance level in a clear uptrend or downtrend will be more probably to win the Trade.
One thing remembers engulfing pattern trade only support or resistance levels.
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