- Engulfing Candle Patterns & How to Trade Them
- Using Bullish Candlestick Patterns To Buy Stocks
- Bullish Engulfing Pattern Definition
Engulfing candles tend to signal a reversal of the current trend in the market. This specific pattern involves two candles with the latter candle ‘engulfing’ the entire body of the candle before it. The engulfing candle can be bullish or bearish depending on where it forms in relation to the existing trend. The image below presents the bullish engulfing candle.
Engulfing Candle Patterns & How to Trade Them
Now, applying the concept of volume to the bullish engulfing pattern could be done in many ways. However, one of the most logical approaches would be to require that the volume for the pattern is higher than the volume of the surrounding bars. High volume shows us that the market performed the bullish engulfing with conviction, which could improve the profitability of the pattern.
Using Bullish Candlestick Patterns To Buy Stocks
The bullish engulfing candle can be used as a signal to exit a short trade. If you are holding a short position and after a fall in the market you see a bullish engulfing pattern it is better to book profit.
Bullish Engulfing Pattern Definition
Now, what this means is that we buy if the volatility level preceding the pattern is quite low. However, we require a significant range expansion on the last bar of the pattern, meaning that the upward drive of the market seems strong and sound.
In this article, you 8767 ve learned what a bullish engulfing pattern means and signifies. We 8767 ve also had a closer look at some examples of how you could implement the bullish engulfing pattern in your own trading. Just remember that you always need to test a strategy before you trade it. You can read more about this in our article on backtesting or how to build a strategy.
Spotting reversal, as you all know market moves in trend, in an up-trending majority of trader will seek to buy at a pullback, but no one know at which level will the pullback will end, so by spotting engulfing candle in a pullback we can time the market at a possible reversal level.
The appearance of the engulfing candle, depending on the severity of the candlestick, can be enough to tilt the bulls and have them exit their trading positions. In terms of severity, we would love to see the bottom of the candlestick fall a great distance beyond the previous low.
An even better example is a higher time frame retrace in price in an overall down trending market and using the lower time frame up trend completion as a trade entry.
Now, if we 8767 ve had a bearish trend for some time, it also means that the market with most likelihood is below it 8767 s moving average. And that 8767 s what we try to benefit from with this strategy.