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The Engulfing pattern is the trend reversal pattern and engulfing is nothing but covering the previous body
If the latest green body covers the entire red body then it is positive engulfing and vice versa
Condition to qualify
1. There should be a trend of recent fall in the price
2. The latest green body should cover the entire red body of the previous day
3. There might be a increase of trade volume during the engulfing day
Buying :Highest price of the latest green body (ie) the previous day’s highest
Selling : The lowest of the latest green body (ie) the previous day’s lowest
The profit margin should be the previous day’s highest + risk taken profit (difference between the previous day’s highest and lowest)
Engulfing is a reversal pattern which is the present candlestick covers the previous candlestick.
- the latest green body should cover the previous red body
- the trading volume might increase during engulfing day
- should appear only after a price fall
Bullish engulfing:
After a price fall when green body completely covers the previous red body it is bullish engulfing. High volume may be seen in last two candles.
Prices are expected to rise. Entry- Highest of the two candles. Stop loss- Lowest of the two candles.
Engulfing pattern is a type of candlestick pattern in which the right side candle engulfs the left side candle.
Conditions: The open price, close price, lowest price and highest price of right candle should be greater than that of left candle.
Buy when the price is greater than highest price of right candle.
Stop loss at the lowest price of right candle.
Exit price at same margin as between buy and stop loss.
When a candlestick engulfs or covers the previous candlestick completely it is a engulfing pattern.
Current body must completely cover the previous body.
Increase in volume on engulfing day
on a bullish engulfing pattern buy on the highest price of the engulfing stick
in a bearish pattern sell on the lowest of engulfing pattern
unwinding and covering depends on the risk taken
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