Engulfing candle pattern is considered as a candlestick pattern signaling a trend reversal. There are 2 types of Engulfing, which are Bullish Engulfing and Bearish Engulfing candle pattern. Please go through this article to better understand these two candlestick patterns and how to use them effectively.
In this article, I will introduce to you what Bullish Engulfing candle is. Its characteristics, meaning, the way to confirm and trade it in Binary Options most effectively will also be available.
An overview video introduces Bullish Engulfing candlestick pattern
What is Bullish Engulfing?
Bullish Engulfing (BuE) is a strong reversal candlestick. It is also a reliable pattern that successful traders often use for trading. Because it signals a price reversal from decreasing to increasing in the future with high accuracy.
Characteristics of a Bullish Engulfing candle
This pattern consists of 2 candles.
The first candlestick is a bearish candle.
Second candlestick: A strong bullish candlestick engulfs the first candle and clears the bearish momentum of the previous one.
Bullish Engulfing meaning
This candlestick shows the strength and overwhelming of the bulls (buyers). It clearly provides a reversal signal at the end of a downtrend. The last green candle covers and overwhelms all previous red candles.
Bullish Engulfing is better than Bullish Pin Bar
Combining two candles to form a BuE pattern (A) => The price decisively reverses from bearish to bullish (B) => Hammer candlestick (C).
Although the direction of the price is similar to the Hammer (Bullish Pin Bar) candlestick, BuE is a combination of two candlesticks (which takes a longer time). This is why this candlestick pattern is more reliable than the Bullish Pin Bar.
Some other variants
Standard Bullish Engulfing candlestick (A) => The price goes down weakly before a strong reversal (B). It clears the results of the previous 3 candles decisively.
Variant BuE candle (A) => The price goes down and exhaust before increases sharply when the buyers dominate (B).
How to trade binary options with Bullish Engulfing
This candlestick pattern is a signal of a reversal from bearish to bullish in the future. But in order to use it effectively, you need to combine BE with trend indicators.
Combine with SMA30 indicator
Conditions: A 5-minute Japanese candlestick chart combined with the SMA30 indicator. The expiration time is 15 minutes or above.
SMA30 is a trend-oriented indicator. When the price is above the SMA30, the market is in an uptrend. In contrast, when the price stays below the SMA30, the market is in a downtrend.
How to open an option:
Open an UP option: Bullish Engulfing candle is above the SMA30 and continues the uptrend.
Explanation: When the price is above the SMA30, the market is in an uptrend. When the pattern appears, there is a possibility that the price will continue the current trend.
Combine with Support
Conditions: A 5-minute Japanese candlestick chart. The expiration time of 5 minutes.
Open an UP option: The pattern forms right at the support level.
Explanation: When prices reach the support zone, the probability of a rebound will be relatively high. Bullish Engulfing is a safe entry signal to open “UP” options.
Notes when trading with this pattern
– To be considered a bullish reversal, the current trend needs to be a bearish one.
– Bullish Engulfing candlestick pattern has high accuracy when appearing at the end of a downtrend.
– Traders should not only look at the two candlesticks that make up this pattern. Instead, observe the previous candles to get a better overview when opening orders.
I hope this article may help you get an understanding of the Bullish Engulfing candle pattern. Wait up for the Bearish Engulfing candlestick analysis article on How To Trade Blog to fully integrate your Japanese candlestick knowledge base.