7# Bearish Engulfing Pattern Trading System

Submit by JanusTrader

The Bearish Engulfing Pattern is directly opposite to the bullish pattern. It is

created at the end of an up-trending market. The red body completely engulfs

the previous day's green body. This shows that the sellers are now

overwhelming the buyers. 

 

 

Description

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

opposite colored bodies. The Bearish Engulfing Pattern is formed after an

uptrend. It opens higher than the previous day’s close and closes lower than

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

day’s green candle.

Criteria

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

Wicks are not a consideration.

 Prices have been in a definable uptrend, 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.

 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

Pattern Psychology

After an uptrend has been in effect, the sellers have taken over and moved

the price below where it opened the day before.

 

On this EURJPY chart we had two bearish engulfing patterns occur at the

Daily resistance. The first occurred on November 8 after a Doji indicated a

change in investor sentiment this was followed the next day by a bearish

engulfing candle confirming the change in trend. The trade was entered at the

open of the next candle at 114.191. The trade hit the Take Profit placed at

Daily support on November 12 for a profit of 300 pips. The stop loss was

placed just above the previous Doji at 130 pips.

The second trade occurred when a bearish engulfing candle failed to break

the Daily resistance at 114.73. I entered the trade at the open of the next

day’s candle on November 23 at 113.531. The trade hit Take Profit the same

day when it hit the Daily support for 240 pips. Stop Loss was placed just

above the previous candle at 140 pips.

 


In the picture Bearish Engulfing Pattern forex system in action.

In this example a Doji candle formed on May 4 at a support at .8982. The

next day saw a bearish engulfing candle where the wick touched both the

Daily and Weekly resistance. The trade was entered at the open of the next

candle at 0.8870. The Stop was placed above the previous candle at 0.9047

for 180 Pips. Take profit was set at 0.8671 for 190 Pips.

 

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