Bullish engulfing, as well as, bearish engulfing are two of the most powerful price action candlestick patterns. I have mentioned them briefly in my Candlesticks article, but now I want to put more emphasis on those two. More than that- bullish engulfing and bearish engulfing patterns are deeply ingrained in my trading strategy. Let’s explore what those two candlestick price action patterns can help us achieve.
INTRODUCTION– Bullish Engulfing and Bearish Engulfing- Probably The Best Price Action Candlestick Patterns
This article will be divided into two parts- first part will deal with the bullish engulfing pattern; the second part will go over the bearish engulfing candlestick pattern. History repeats itself, so I believe that the best way to read the market is to know what happened in the past. Bullish engulfing patterns are a confirmation that more buyers want to join the uptrend. On the other side, a bearish engulfing pattern gives confirmation for more sellers joining the short side. Let’s move to the first part- the bullish engulfing candlestick pattern.
PART 1– Bullish Engulfing Candlestick and Price Action
What is a candlestick?
Before I move to the real part, I would like to remind you once again what is a candlestick.
A candlestick contains an instrument’s value at open, high, low and close of a specific time interval.
Let’s say we are looking at a daily candlestick. It does contain the value at open, high, low and close on any particular day.
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What is price action trading and why it does make you a better trader
Price action trading is a type of trading that allows traders to observe and study the current market. This, in turn, allows you to anticipate the market trend and make certain assumptions/decisions based on the current (and actual) price movements.
Price action trading is the purest type of trading that eliminates all noise.
It does not anticipate, it reads the market.
Price action is great!
Is price action trading better than other types of trading?
Hard to say.
It is really difficult to say if one type of trading is better than another. What matters is which type of trading fits your personality.
Another important element of trading is money management. What matters is even not that much the trading system, but the way you use it.
Profitable traders will agree with me.
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WHILE everyone is used to seeing the conventional line charts found in everyday life, the candlestick chart is a chart variant that has been used for around 300 years and discloses more information than your conventional line chart.
The candlestick is a thin vertical line showing the period’s trading range.
A wide bar on the vertical line illustrates the difference between the open and close.
Note: The daily candlestick line contains the currency’s value at open, high, low and close of a specific day.
The candlestick has a wide part, which is called the “real body“.
This real body represents the range between the open and close of that day’s trading.
When the real body is filled in or black, it means the close was lower than the open.
If the real body is empty, it means the opposite: the close was higher than the open.
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Understanding candlestick patterns goes far beyond just remembering and recognizing certain formations. Many books have been written about candlestick patterns, featuring hundreds of different formations that supposedly provide secret information about what is going to happen next.
Truth be told, it will make no difference to your trading performance whether you know what the Concealing Baby Swallow, Three Black Crows or Unique Three River Bottom are.
What really matters is that you understand what the candlesticks in front you of you tell you about price structure, trend strength, buyer/seller dynamic and the likely path for future price movements.
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