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Bullish Engulfing Candle Pattern as Trading Signal

Bullish Engulfing Candle Pattern as Trading Signal

Richard Krivo, Trading Instructor

Instructor's Response:

As much as we all wish there would be, there is no absolute, fail-safe method available to separate the "might be" from the "solid" trading indicators and signals. This is one of the reasons why it is so critical to use protective stops and good money management principles on each and every trade.  

On the example chart, when that bullish engulfing candle closes (we have to wait for a candle to close before we can base a trade on it) a trader could take a long position at the open of the next candle after the bullish engulfing. The protective stop would go below the wick of the red candle preceding the bullish engulfing candle...see the chart below.

As shown in this historical example, had the trader stayed in the trade from the time of their initial entry, they would be enjoying a gain of over 900 pips.

chart 11 11 09

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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