Forex Strategies Resources

6# Bullish Engulfing Pattern Trading System

Reversal Pattern

Submit by JanusTrader

This two candle pattern is one of the most powerful indicators of a change in

trend. The Bullish Engulfing Pattern is formed at the end of a downtrend. A

green body is formed that opens lower and closes higher than the red candle

open and close from the previous day.

This completely engulfs of the previous

day's candle body and represents overwhelming buying pressure overcoming

the selling pressure.

A Bullish Engulfing signal is one of the major signals. Like the Doji, if it occurs

at or near a major level of previous support it indicates that a high probability

trade is setting up. However unlike the Doji you can enter at the open of the

next candle.

Description

The Engulfing pattern is a major reversal pattern comprised of two opposite

colored bodies. The Bullish Engulfing Pattern formed after a downtrend. It

opens lower that the previous day’s close and closes higher than the previous

day’s open. Thus, the green candle completely engulfs the previous day’s red

candle.

Criteria

 The body of the second day completely engulfs the body of the first day.

Wicks are not a consideration

 


 There is a definable down trend, even if it has been short term.

 Prices are at a major level of resistance.

Additional Pattern Enhancements

 A large body engulfing a small body.

A large body engulfing a small body.

 

 If the engulfing body engulfs several previous candles.

 If the engulfing body engulfs the body and the wicks of the previous day

 If the pattern forms after a Doji

 


In the pictures Bullish Engulfing Pattern forex system in action.

Here we had a Doji/Pin bar candle on May 25 followed by a bullish engulfing

candle. The trade was entered the next day at 1.41396. The stop was placed

a few pips under the Doji/Pin bar wick at 1.39868 for 150 pips. Take profit

was placed at the weekly resistance at 1.4634 for 490 pips. Profit target was

hit on June 3.

 

In this example the support at 85.460 held for about a week with no candle

closing below it. On Jan 21 a bullish engulfing candle formed, entry was at

the open of the next candle at 86.308. Stop was set below the previous

candle at 85.470 for 86 pips. Take profit was set at the daily resistance at

87.657 for 132 pips. Take profit was achieved on Jan 27

 

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