What is Engulfing Candlestick?
Engulfing is a trend reversal candlestick which consists of two candles, in which the end candle (2nd candle) fully engulfs the entire body of the 1st candle. Engulfing candle can differ in the form whether it’s an uptrend or downtrend. This type of candlestick has 2 types:
Bullish Engulfing candlestick found in a downtrend indicating the beginning of a bullish trend (uptrend). In this candlestick, the 2nd candle will engulf the 1st red candle’s entire body and closed above previous candle highs. This indicates a huge surge in buying pressure. Bullish Engulfing can appear in between continuous uptrend also, it doesn’t mean to be traded but with some sort of strategy to increase the profit factor and winning percentage.
How to trade Bullish Engulfing candlestick:
Buy after the candle fully closed and stop loss below the low of the candle and take profit is up to next resistance.
It’s the just opposite of a bullish engulfing candlestick which found in an uptrend indicating the beginning of the bearish trend (downtrend). Here 1st candle is small and bullish while the next candle engulfs the previous candle’s body and closes below the low. Again, it can form anywhere but trade with strategy.
How to trade Bearish Engulfing candlestick:
Sell after the candle fully closed and stop-loss above the high of the candle and take profit is up to next support.
Note: Always Trade candlesticks patterns wisely with proper risk management else your trading funds will always at high risk.