As an example, as price reaches an area of support, a trader may believe that the buyers are most likely to take control of the market, thus driving the price all the way to the resistance level. This trader would then enter a LONG buy trade.

A trend trader could do a similar thing following a certain pullback. He would then buy a certain currency pair thinking that the buyers, who had control in the past, will step back in the market aggressively. The tricky part comes down to this: Traders often overlook the fact that price movements are the only indication of who has more power in the market.

However, looking at candlesticks is the first sign of aggressiveness and pressure from the buyers or the sellers. Indicators such as the RSI, Bollinger Bands, and the ADX still have their place in trading. However they must not be solely relied upon. Professional traders always look at the price before anything else.

Alright, I recommend you download the checklist I prepared for this article. Price action simply refers to all the movements in price. Traders may look at the trend, structure, or candlestick patterns to determine who has been more aggressive. Indeed, price action represents the past but by knowing who was in control in the past, we can determine with good accuracy who will be in control of the market direction in the future.

Now that this is addressed, make sure you understand how candlesticks are formed. They contain the open, close, low, and the high of a specific period. According to Investopedia , both the body and wick of the previous candlestick must be covered by the Engulfing candle. That will give you a better accuracy when trading those patterns.

The powerful aspect of the Engulfing Pattern is that it signifies a strong likelihood of reversal in the market. The key however, is that not all Engulfing Patterns are considered significant. For a bullish Engulfing Pattern to be significant, it must appear after a significant drop in the price.

Bullish Engulfing Pattern

For a bearish Engulfing Pattern to be considered valid, it must appear after a good increase in the price. By looking at any currency pair, you will be able to notice several Engulfing Patterns.

The key, however, is to combine those price action signals with other factors to create confluence. My first real profitable trading strategy consisted of trading Engulfing candles with major structure points. I would first start by identifying the major support and resistance zones. For instance, if you were to trade the 1 hour chart, you would look at support and resistance levels on the 4hr, Daily, and Weekly charts.

No need to go higher than the weekly chart. If you were to trade the Daily chart, you would look at support and resistance levels only on the Weekly chart.

That will give you the main significant zones. Once price gets to a zone, your goal is to determine whether price is likely to reverse. The thing is, you want to make sure that your Engulfing Pattern is a great one. The Perfect Engulfing Cheat Sheet I created will help you do just that.

This strategy is very simple, yet very powerful due to the fact that it uses a strong candlestick pattern.

Based on the pair you decide to trade, your win ratio will vary. In other words, for every trade you win, you can expect to lose one.

Your success will depend on the other rules you put in place. Proper risk and money management is always a must. There are several factors affecting the success of this strategy and I will be discussing those in an upcoming webinar.

You can register to my free live training using this link.

The Engulfing Pattern is simple, yet highly powerful. That alone can give you an edge on other traders. I want to know…have you ever used Engulfing Patterns in your trading? If so, what were the results? Leave a comment below!

The Magic of The Engulfing Pattern - And Trading It

My name is Etienne Crete from Montreal, Canada. I'm a swing trader 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. I've interviewed the greatest figures of the trading world and consider it my mission to help you implement their advice!

Thanks a lot for the comment! I have to agree on that Good job for sticking to the plan! Risk management is the area which requires most discipline because it is so dull.

How to Trade The Bullish Engulfing Pattern

Boring like a seatbelt. I just got Mandi's journaling questions and included them in the show notes: Home Start Here About. Look at the price movements. The Engulfing Pattern Alright, I recommend you download the checklist I prepared for this article. Okay… Now that this is addressed, make sure you understand how candlesticks are formed. Get it by clicking here. The Author Etienne Crete My name is Etienne Crete from Montreal, Canada.

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