The Only ENGULFING INDICATOR and Trading strategy You Will Ever Need. How to Trade Engulfing Pattern. Engulfing candles don’t always have to appear at the end of a trend. When viewed within a strong trend, traders can glean information from the candle pattern pointing towards continued momentum in the direction of the existing trend.
In this article, I will give you an easy 4 step process to Trade Engulfing Pattern, and how you can trade it for huge profits. You will also learn the characteristics that must be present to make it tradable. Knowing these things will help you maximize your profit potential and minimize your risk. So, Let’s get started.
STEP 1. Isolate the Trend
The first step in applying the engulfing candle trading strategy is to determine the dominant trend direction, and thus the direction you will trade-in.
STEP 2. Watch for an Upward or Downward Pullback
Once the trend is established, wait for a pullback. If there is no trend, or it is unclear, don’t utilize this strategy. Waiting for a pullback means you’re getting advantageous pricing for the next wave of the trend when—and if—it unfolds.
STEP 3. Entering the Trade
With the trend isolated and a pullback occurring, wait for the engulfing candle strategy trade signal. During a downtrend, wait until a down candle engulfs an up candle. For an engulfing candle strategy signal during a downtrend, wait until a down candle engulfs an up candle.
STEP 4. Exiting the Trade
The engulfing candle that occurs after a pullback in an overall trend is designed to get you into a trade as the next wave of the trend is likely to unfold. But, however, It doesn’t always. Trends can persist for a long time or can fail quickly. Therefore, this method does not have a specific exit.