Saturday, January 9, 2021

Bullish Engulfing Candlestick Pattern & How To Trade Forex With It

Bullish Engulfing candlestick pattern is a very effective price reversal signal in price action analysis. Today, I’m going to introduce you to this classic candlestick pattern. Let’s see the article to know what a Bullish Engulfing candlestick is and the most effective way to use this pattern in Forex trading.

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What is a Bullish Engulfing candlestick pattern?

Bullish Engulfing is a warning signal that the market will strongly reverse from bearish to bullish. This pattern consists of 2 candles. The first one is a 1 red bearish candle. And the second one is 1 strong green bullish candle covering the previous candle. The second strong bullish candle is called the engulfing candle.

In Forex, every time Bullish Engulfing appears, traders will consider opening BUY orders on the basis of a bullish reversal.

What is a Bullish Engulfing candlestick pattern
What is a Bullish Engulfing candlestick pattern

Meaning of the Bullish Engulfing

Combining two candles to form a Bullish Engulfing pattern (A) => The price decisively reverses from bearish to bullish (B) => Hammer candlestick (C).

Meaning of the Bullish Engulfing
Meaning of the Bullish Engulfing

Although the direction of the price is similar to the Hammer (Bullish Pin Bar) candlestick, Bullish Engulfing is a combination of two candles (with a longer candle time period). This is why the Bullish Engulfing candlestick pattern is more reliable than a single Pin Bar.

On the price chart, Bullish Engulfing may appear at the end of downtrends. It is a reliable signal that the price could reverse to bullish. They also occasionally appear in uptrends, warning that the bullish momentum will continue.

Position of the Bullish Engulfing on the price chart
Position of the Bullish Engulfing on the price chart

Some variant Bullish Engulfing patterns

With the Bullish Engulfing, the second bullish engulfing candle is very important. So in some cases, you can see some other variations. A bullish engulfing candle completely eliminates the bearish momentum of the previous candles.

Some variant Bullish Engulfing patterns

How to trade and win Forex with the Bullish Engulfing

Here’s how to open a basic Forex order with the Bullish Engulfing candlestick pattern. For a safe transaction and maximum profit, you need to define the exact entry point, stop-loss, and take-profit.

*Notes: Bullish Engulfing is a signal that the price will reverse to bullish. Therefore, you can only open BUY orders when this candlestick pattern appears.

Strategy 1. Open a Buy order at the bottom of the market

The trading strategy is quite risky because it is a bottom-fishing trading style. However, if the price goes according to the scenario, the profit will be maximized. Place a BUY order when the price is in a downtrend and hits the bottom to create a Bullish Engulfing pattern as follows:

+ Entry Point: As soon as the price completes the Bullish Engulfing.

+ Stop-Loss: At the lower shadow of the bullish engulfing candle.

+ Take-Profit: when the price touches old resistance levels that have been formed in the past.

Open a Buy order at the bottom of the market
Open a Buy order at the bottom of the market

Strategy 2. Trend trading

This trading strategy is very safe because the price is already in an uptrend. The basis is that when the Bullish Engulfing pattern appears in an uptrend, the bullish momentum will continue. You just need to wait patiently for this pattern to appear to open orders. How to open an order is as follows:

+ Entry Point: As soon as the price completes the Bullish Engulfing.

+ Stop-Loss: At the nearest support before the pattern forms.

+ Take-Profit: when the price touches old resistance levels that have been formed in the past.

Trend trading with the Bullish Engulfing pattern
Trend trading with the Bullish Engulfing pattern

Again, Bullish Engulfing is one of the strongest reversal signals on the price chart. Using this candlestick pattern will help you a lot when trading Forex. Get familiar with the Bullish Engulfing pattern today on a Demo account.

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The post Bullish Engulfing Candlestick Pattern & How To Trade Forex With It appeared first on How To Trade Blog.



source https://howtotradeblog.com/bullish-engulfing-candlestick-pattern-forex/

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