The Bullish and the Bearish Engulfing Patterns are the most popular type of candlestick signal because it can be easily identified from your chart. However, errors or mistakes often occurs if it has been interpreted in the wrong way. To make it clear especially for the newbies, please refer on the image sample below.
In the case of the Bullish Engulfing Pattern, you have to make sure that the market is on a downtrend situation. If you do not know how to define the current market trend then you need to learn "Line Plotting" which I will be discussing on some of my other post. The first signal that you need to look is a short term candle which indicates a downtrend. If it's a Doji then the higher would be the chances of reversal. The second candle must have a completed body denoting an uptrend and it must engulf the first previous candle. As for the wicks or shadows, simply disregard them.
For the Bearish Engulfing Pattern, it is the opposite of the above case. The trend must be on a clearly definable up trend and look for a short term candle or Doji. The second succeeding candle must engulf the first but the a stronger signal can be achieved when the second candle engulfs two or more of the previous candle's bodies.
In the case of the Bullish Engulfing Pattern, you have to make sure that the market is on a downtrend situation. If you do not know how to define the current market trend then you need to learn "Line Plotting" which I will be discussing on some of my other post. The first signal that you need to look is a short term candle which indicates a downtrend. If it's a Doji then the higher would be the chances of reversal. The second candle must have a completed body denoting an uptrend and it must engulf the first previous candle. As for the wicks or shadows, simply disregard them.
For the Bearish Engulfing Pattern, it is the opposite of the above case. The trend must be on a clearly definable up trend and look for a short term candle or Doji. The second succeeding candle must engulf the first but the a stronger signal can be achieved when the second candle engulfs two or more of the previous candle's bodies.
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