Engulfing Trading Strategy:
How good is the Engulfing Trading Strategy? Is the Engulfing Trading Strategy a good investment? To find out, why don’t we test the Engulfing Trading Strategy 100 times, just as we tested other trading strategies on this channel multiple times. You should check them out, and subscribe to the Trading Rush Channel, because the last thing you want to do as a trader is rely on a strategy that doesn’t work.
An engulfing pattern is a two candlestick pattern in which a small red candle is followed by a big green candle that engulfs the previous red candle. Bullish engulfing is a reversal pattern, and it is used to find reversals in downtrends.
Bullish engulfing patterns are primarily used to determine when to enter and exit a trading strategy. There are some traders who prefer to use candlestick patterns alone when trading on daily and higher timeframes. Why is this candlestick pattern so popular and trusted by many traders? In order to understand that, we must first understand how engulfing patterns work.
Let’s say on the daily timeframe, a stock or a forex pair has made new lower lows four days in a row since candlestick patterns are closely watched. Those who trade on the daily timeframe will see this as a strong selling pressure.
Many buyers are not ready to buy since sellers have taken over the market for four days in a row. If the green candle opens at or below the closing price of the previous red candle and closes above the opening price of the previous red candle, this indicates that there is no selling pressure on that day.
In other words, the sellers who were selling for 4 days in a row are no longer interested in selling, and the buyers are more interested in buying. Consequently, the next few candles will have a higher probability of moving higher. Remember, the bullish engulfing pattern is a short-term pattern.
As a result, when the bullish engulfing pattern occurs, the price has a higher probability of moving upwards for a short period of time. Because of that, it is usually used as an entry signal in a trading strategy that can predict long-term trend direction.
In an uptrend, let’s say you are waiting for the price to touch your support area. If the price touches your support area, you cannot immediately buy, as there must be a reversal confirmation. So instead of risking your money immediately, you wait and take a long trade when the bullish engulfing pattern appears.
Everyone will use the bullish engulfing pattern differently with their own trading strategies, but what I wanted to find out is how good a pattern it really is on its own. As candlestick patterns are short-term trading patterns, there are traders on daily and higher timeframes who hold stocks or forex pairs only for the next 1 or 2 candles. To find out how many times the price actually rose the next day after the engulfing pattern, I tested the Bullish engulfing pattern 100 times.
Follow the trend, Don’t be afraid to be a sheep.
– Antoroy
Bullish Engulfing Trading Strategy:
Bullish engulfing Trading Strategy in Japanese candlestick Charting is one of the forex markets clearest price action signals. A lot of traders used this candlestick pattern to identify price reversals and continuations to support their trading strategies.
A bullish engulfing candle appears at the bottom of a downtrend and indicates bullish pressure. When more buyers enter the market to drive prices up further, the Bullish Engulfing Trading Strategy often triggers a reversal in trend. The bullish engulfing candle pattern shows two candles with the second candle completely engulfing the previous red candle.
Bullish Engulfing Trading Strategy:
In Japanese candlestick charting, bearish engulfing is one of the most clear cut price action signals. Many traders use this candlestick pattern to identify price reversals and continuations to support their trading strategies.
The bearish engulfing candle appears at the bottom of an uptrend and indicates selling pressure. Often, the Bearish Engulfing Trading Strategy causes a reversal in trend as more sellers enter the market to drive prices up. In the Bearish Engulfing candle pattern, the second candle completely engulfs the previous green/blue candle.
Using the engulfing candle strategy:
Forex and commodity markets use the Engulfing Candle Strategy to signal a reversal of a trend. Candle Engulfing Strategy involves two candles with the latter candle engulfing the entire body of the first candle. The engulfing candle strategy can be bullish or bearish depending on where it forms in relation to the previous trend.
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