Engulfing Candlesticks
The other important candlestick pattern I think price action traders need to have knowledge on is the engulfing candlestick. Like pin bar the engulfing candle is a reversal pattern, which means that a reversal is supposed to take place immediately after you see one form in the market. Unlike the pin bar the engulfing candlestick is a two bar reversal pattern, a pattern which requires there to be two candlesticks present in order for it's formation to be complete.
The formation of a bearish engulf is always a signal that a reversal to the downside is about to take place. The pattern itself consists of two candlesticks.
The bearish engulfing candlestick itself, which I've marked with an arrow, and the bullish candlestick that formed an hour before. The bullish candle is first candle required in the bearish engulf setup. This is the candlestick which the market will always engulf with a bearish candle immediately after it's formation.
In order for a bearish engulfing candle to form, a bullish candle must have formed immediately prior. You can't have a bearish candlestick engulfing another
bearish candle, it has to be a bullish candle in order for it to be a bearish engulf.
Bullish engulfing candlesticks are of course the opposite to bearish engulfing candles, which means their appearance is a sign the market is going to reverse
to the upside. Like the bearish engulfing candle they are also a two bar pattern, but instead of the first candle in the pattern being a bullish candlestick, like we see with the bearish engulfing formation, the first candle in a bullish engulfing setup will always engulf a bearish candle. A bullish engulfing candle cannot engulf another bullish candle, it can only engulf bearish candles.
Engulfing candlesticks are best used as signals to enter trades at pre-existing points where you expect the market to reverse, such as support and resistance
levels or supply and demand zones. They can be traded on their own without any other confirming factors being present, but in my opinion they don't tend to work out as well as pin bars do.
The other important candlestick pattern I think price action traders need to have knowledge on is the engulfing candlestick. Like pin bar the engulfing candle is a reversal pattern, which means that a reversal is supposed to take place immediately after you see one form in the market. Unlike the pin bar the engulfing candlestick is a two bar reversal pattern, a pattern which requires there to be two candlesticks present in order for it's formation to be complete.
The formation of a bearish engulf is always a signal that a reversal to the downside is about to take place. The pattern itself consists of two candlesticks.
The bearish engulfing candlestick itself, which I've marked with an arrow, and the bullish candlestick that formed an hour before. The bullish candle is first candle required in the bearish engulf setup. This is the candlestick which the market will always engulf with a bearish candle immediately after it's formation.
In order for a bearish engulfing candle to form, a bullish candle must have formed immediately prior. You can't have a bearish candlestick engulfing another
bearish candle, it has to be a bullish candle in order for it to be a bearish engulf.
Bullish engulfing candlesticks are of course the opposite to bearish engulfing candles, which means their appearance is a sign the market is going to reverse
to the upside. Like the bearish engulfing candle they are also a two bar pattern, but instead of the first candle in the pattern being a bullish candlestick, like we see with the bearish engulfing formation, the first candle in a bullish engulfing setup will always engulf a bearish candle. A bullish engulfing candle cannot engulf another bullish candle, it can only engulf bearish candles.
Engulfing candlesticks are best used as signals to enter trades at pre-existing points where you expect the market to reverse, such as support and resistance
levels or supply and demand zones. They can be traded on their own without any other confirming factors being present, but in my opinion they don't tend to work out as well as pin bars do.
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The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.