What is the Bullish engulfing candlestick pattern?
A bullish engulfing candlestick pattern is a bullish reversal candlestick pattern which is the two-candle formation that often signals a strong trend bullish reversal in the market. It happens when a smaller red bearish candle is followed by a larger green bullish candle that completely covers or "engulfs" the previous candle.
Important key factor of Bullish Engulfing Candlestick Pattern
First candle should be a red bearish candle showing downside price movement.
The second candle should be a green bullish candle that opens below the previous close and closes above the previous open candle.
The second candle must completely cover the body of the first body candle.
The pattern works best when reaches at the bottom of a support level.
How to Identify a bullish engulfing candlestick pattern?
Look for a clear down-trend market.
The first candle should be red and a relatively small candle.
The second candle must be green and larger compared with the first red candle.
The second candle's body must completely cover the first candle's body.
Important Key Factors of Market Conditions
Trading volume should increase during the second candle closing.
The pattern is more reliable when reaching the support zone.
Market sentiment should show signs of seller exhaustion.
Look for supporting technical indicators like RSI and moving average.
Verify market trends using multiple timeframes like 5 and 15Min.
How to work with a bullish engulfing pattern?
Wait for the second candle to close with a strong green candle.
Enter the trade at the opening of the next third candle.
Place a stop-loss order below the low of the engulfing candlestick pattern.
What should be the Risk Management for trade?
Keep your position size reasonable (1-2% of your trading capital).
Use a risk-reward ratio of at least 1:2 for all trades.
Consider market volatility when placing a stop losses order.
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