16# Engulfing Pattern Trading System

Engulfing Pattern with Stochastic Oscillator


Submit by Max Trader 02/12/2013


The Engulfing pattern is a major reversal pattern. It is made up of two candles that

are 2 different colors; red being a downtrend candle, and green being an uptrend

candle. This particular pattern is formed after a clear downtrend in the market. This

candle ideally opens lower that the 1st day’s close, then ideally closes higher than

the 1st day’s open, which will show the green candle completely engulfing the

previous red candle of the day before. The candle for the previous day shows that

the trend was losing momentum, the large body shows that the new direction has

started of with strength.


Typically, a Bullish Engulfing pattern reveals when the

buyers have stepped in giving a clear indication of a change in direction. NOTE: the

Bullish candle DOES NOT have to engulf the shadows/wicks of the previous

downtrend candle, only the body has to be completely engulfed. The bigger the engulfing, the stronger the signal.

Engulfing Pattern in this trading system is filtered by stochastic oscillator.


Time Frame is 240 min or higher.



Forex indicator

Pattern Recognition Master

Stochastic Oscillator (8,5,3).


Rules for Engulfing Pattern Trading System


Long entry conditions

  1. Engulfing pattern buy;

  2. 2) Stochastic Oscillator Crosses upward.

Short Entry Conditions

  1. Engulfing pattern sell;

  2. 2) Stochastic Oscillator Crosses downward.

Exit position

Profit target 30-50 pips depends by currency pairs.

Stop loss 15 pips above or below at the entry bar.

Engulfing Pattern Trading System
Engulfing Pattern Trading System

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