The Engulfing Candle trading strategy helps to determine trend bullish and bearish reversals. Signal is detected by the size of candles. Usually, the following candles will be smaller or bigger compared to the previous candle. The new candle is called a takeover. After it appears you need to see the next one. If the candle goes in the direction of engulfing, wait for it to close and then enter the market.
Algorithm of actions during signal formation:
- Pay attention to a candle bigger in size than previous and moving in reverse.
Bullish Engulfing Pattern
Bearish Engulfing Pattern
- Wait for the formation of a new candle to confirm the trend;
- Open a deal in the direction of the engulfing candle. Do it only after the first candle closed and you clearly see an engulfing candle.
Place a PUT option with a bearish trend
An uptrend is defined by higher-swinging highs and higher swinging lows in price. Prices move in waves, advancing, pulling back, and then advancing again. In an uptrend, the advancing waves are larger than the pullbacks lower, creating overall progress higher. During an uptrend, you should take only long positions, buying with the intention of selling later at a higher price.
You should know that the appearance of the candle signal should be confirmed next for him a candle. The engulfing candle that occurs after a pullback in an overall trend is designed to get you into a trade, as the next wave of the trend is likely to unfold. (It doesn’t always.) Trends can persist for a long time or can fail quickly. Therefore, this method does not have a specific exit.
Squatting Candle Strategy
Frequent trend reversals generate squatting candles. They indicate the uncertainty of the market. It usually happens at price levels. It can be one candle or several. A candle with a small body and a long shadow suggests a reversal of the current trend.
Algorithm of actions during signal formation:
- When you see a squatting candle, prepare to open a deal;
- Wait for a new candle to directed against the current trend ;
- After a new candle closed, open a deal in the direction of its movement.
Buying a CALL Option after a squat candle
Place a PUT option with a bearish trend
An uptrend is defined by higher-swinging highs and higher swinging lows in price. Prices move in waves, advancing, pulling back, and then advancing again. In an uptrend, the advancing waves are larger than the pullbacks lower, creating overall progress higher. During an uptrend, you should take only long positions, buying with the intention of selling later at a higher price.
