Engulfing Pattern
An engulfing pattern is a two-candle reversal where the second body completely covers the first, most reliable at key levels.
An engulfing pattern is a two-candle reversal where the second body swallows the first. It is most reliable at key levels after a strong move, and needs confirmation.
An engulfing pattern is a two-candle reversal pattern where the body of the second candle completely covers the body of the first, in the opposite direction. A bullish engulfing appears in a downtrend: a small bearish candle followed by a larger bullish one that swallows it. The pattern is strongest at support or resistance, after a clear move, and when it forms on higher volume. Like all reversal candlesticks, it is a warning requiring confirmation.
How It Works
- Bullish engulfing: big bullish body covers a prior small bearish body
- Bearish engulfing is the mirror image at tops
- Strength rises with level, prior trend and volume
Trading Tips
Trade engulfings at support/resistance, not mid-range
The bigger the engulfing body and the lower its wicks, the stronger the signal
Wait for a follow-through candle before committing
Engulfing Pattern Example
Say EUR/USD slides for a week, prints a small red candle Friday, then Monday opens flat and closes 120 pips higher, swallowing Friday whole. Sellers who held the weekend cover in a rush, fueling the second leg of the reversal.
How Traders Use Engulfing Pattern
Trade engulfings with the higher timeframe wind behind them and volume confirming. Tiny engulfings in dead ranges trap both sides. Stop goes beyond the engulfed candle, target at least twice the risk.
Related Terms
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