My name is Etienne Crete from Montreal, Canada. I'm a swing Forex trader who has the chance to travel the world anytime and help aspiring Forex traders develop a trading method that works for them so they can produce income allowing them to live with more freedom. You see, a lot of aspiring Forex traders lack the confidence to pursue their dreams. I'm there not only to help you develop Forex trader confidence but also to implement the tactics that are proven to give you results.

I blog at www. com and host the Desire To Trade Podcast. That's why you can expect more free content from me than what other people charge for! I run experiments on a consistent basis — the Engulfing candle is by far my favorite pattern. Affiliate Links Thank you for trusting me with my truthful and reliable opinion on any future purchase you may make.

I always disclose this information when it is the case. As a customer of the products I refer, you help me sustain the time and resources to create content on this channel by generating revenue from your sales. This doesn't affect you in any way in the checkout process I'm sometimes even able to arrange a discount for you that is special from other customers. If you are aspiring to Forex but wonder how to put together a solid trading plan for trading while traveling, I recommend you grab my FREE One-Page Trading Plan Template.

It will help you simplify your trading strategy on a single page! In a candlestick price chart , the wide parts of candlesticks are called "real bodies. The real body of a down candle is often black or red in color. In an up or bullish candle, the top marks the closing price, and the bottom marks the opening price.

The real body of an up candle is often white or green. The high and low prices for the period may be indicated by thin lines that look like wicks of the candle and that extend beyond the real body.

A bearish engulfing candle occurs when the real body of a down candle completely envelops the real body of the prior up candle. A bullish engulfing candle occurs when the real body of an up candle completely envelops the real body of the prior down candle.

These engulfing candles indicate a strong shift in direction, and when combined with observation of the price-trending direction that precedes it, this shift creates the opportunity for a trading strategy. The first step in applying the engulfing candle day-trading strategy is to determine the dominant trend direction, and thus the direction you will trade-in. An uptrend is defined by higher-swinging highs and higher-swinging lows in price. Prices move in waves, advancing, pulling back, and then advancing again.

In an uptrend, the advancing waves are larger than the pullbacks lower, creating overall progress higher. During an uptrend, you should take only long positions, buying with the intention of selling later at a higher price. A downtrend is defined by lower-swinging lows and lower-swinging highs in price. In a downtrend, the declining waves are larger than the pullbacks higher, creating overall progress lower.

During a downtrend, you should take only short positions, selling a borrowed asset with the intention of buying and returning it later at a lower price. Once the trend is established, wait for a pullback. If there is no trend, or if it is unclear, don't utilize this strategy. Waiting for a pullback means you're getting advantageous pricing for the next wave of the trend when—and if—it unfolds. If the trend is down, watch for an upward pullback.

The pullback should not rally above the high of the prior pullback, as this violates the rules of a downtrend. If the trend is up, watch for a downward pullback. The pullback should not drop below the low of the prior pullback, as this violates the rules of an uptrend. A pullback should be composed of at least two price movements, indicating the price has actually corrected.

Pullbacks may move in the opposite direction of the trend or may just move sideways. With the trend isolated and a pullback occurring, wait for the engulfing candle strategy trade signal. During a downtrend, wait until a down candle engulfs an up candle. Enter a short trade as soon as the down candle moves below the opening price the bottom of the real body of the up candle in real-time.

Bullish engulfing pattern definition: The Bullish Engulfing Candlestick Pattern is considered a bullish reversal pattern during a downtrend and occurs when the bullish candle engulfs the smaller bearish candle the period before. Bearish engulfing pattern definition: The Bearish Engulfing Candlestick Pattern is considered a bearish reversal pattern during rising trends.

It occurs when the bearish candle engulfs the smaller bullish candle from the period before. It cannot be denied that one of the best things that a trader can learn to perform is engaging in trading that is based on a trend. One sure method to enter the realm of trading moves as the momentum is gaining a quicker pace is to apply the usage of the engulfing candle day-trading strategy.

Engulfing pattern trading strategy is based on an algorithm where traders need to define the major trend in the first step and then enter into a trade when an engulfing pattern between two candles occurs in the primary trend direction. Enter a long trade when the opening price is above engulfing bullish candle close Close 2 price. Enter a short trade when the opening price is below engulfing bearish candle close Close 2 price. Let us create one trading strategy. We tested this strategy using the daily candle EA test on major forex pairs.

We wanted to see the results. We had the best result when we tested high volatility currency pairs such as GBPUSD or GBPJPY and the worst performance on low volatility currency pairs. Our expectations were much more significant. We tried to add a rule to make a better performance. We noticed that if we have a bullish engulfing pattern and Close 2 price is near to High 2 price, then the results are much better. And of course, if we have a bearish engulfing pattern and Close 2 price is near to Low 2 price, then results are much better too.

Close 2 price needs to be above SMA 50 for a bullish trend and below SMA 50 for a bearish trend on the daily chart. The broad sections of candlesticks noticed on a candlestick pricing chart are referred to as natural bodies.

When a candle is bearish or down, the upper part indicates the price at the opening phase, while the bottom part indicates the price at the closing phase regarding the period that is being observed. The color red or black is frequently used to denote the actual body of a down candle. On the other hand, often, there is the color green or white usage to tell the existing body of an up candle.

Both low and high ones can be presented via thin lines in essence, which resemble the appearance of wicks of a candle. These lines surpass the boundary of the natural body. It is a good idea to conduct the isolation of a trend.

When it comes to applying the strategy of the engulfing candle in day-trading, it is needful to engage in the determination of the predominant direction of the trend. This will then result in the order that the trader will apply to perform his or her trades.

There is the presence of an uptrend when prices possess highs that are higher-swinging as well as lows that are higher-swinging.

Prices are noted to follow the momentum of a pattern of waves, such as engaging in advancements, drawing backward, and moving forward once again. The trader should be careful only to implement long-term positions in the uptrend, which means the trader will purchase to sell later for a relatively higher price.

There is a downtrend in such cases that the price possesses lows that are lower-swinging and lower-swinging. In the case of a downtrend, the waves are in a state of decline, which means that they are larger in size than the pullbacks that are higher in essence. As a result, this produces a lower form of progress overall.

When there is a downtrend, the trader will implement short positions to sell an asset in t selling borrowed based on desiring to purchase and return it later at a lower rate. Privacy Policy. Home Choose a broker Best Forex Brokers Learn trading Affiliate Contact About us. Home » Education » Forex strategy » Engulfing Trading Strategy — Case Study. The Engulfing Candle Day-Trading Strategy What is the definition of engulfing?

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Related posts: High Probability Reversal Candlestick Patterns — Case Study Megaphone Chart Pattern Success Rate — Case Study Autochartist Accuracy Case Study Forex Day Trading Best Indicators — Case Study Forex Weekly Strategy Based on Moving Average Which is Better Forex or Binary Options? The pullback should not drop below the low of the prior pullback, as this violates the rules of an uptrend. You can also change the color in the settings of the indicator. Engulfing pattern trading strategy is based on an algorithm where traders need to define the major trend in the first step and then enter into a trade when an engulfing pattern between two candles occurs in the primary trend direction. Trader since

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