Almost all traders in the world use Japanese candlestick charts to observe prices. And within the Japanese candlestick chart are candlestick clusters arranged in an orderly manner announcing future price movements. Those candlestick clusters are called candlestick patterns used by traders to open orders effectively.
In this article, I will introduce in detail the Bullish Engulfing candlestick pattern. Characteristics, meaning, how to identify, and effective ways of trading when they appear on the Japanese candlestick chart.
Commitments: This is a place to share the trading process for the purpose of exchanging and learning good strategies. We do not show off our profit withdrawals or bait individuals for personal gain. Here, we have full evidence of our transactions, winning, and losing. The goal is to become a place for traders to share their steady money-making process.
- 1 What is Bullish Engulfing?
- 2 Market movements when Bullish Engulfing candlestick pattern shows up
- 3 The method of capital management
- 4 Trading principles
- 5 Review and analyze opened orders with the Bullish Engulfing candlestick pattern in Olymp Trade on 11/05/2020
- 6 Review and analyze opened orders with the Bullish Engulfing candlestick pattern in Olymp Trade on 12/05/2020
- 7 One last word
What is Bullish Engulfing?
Bullish Engulfing is a pattern of two opposite candlesticks occurring in a downtrend. It consists of 2 candlesticks as follows:
– 1st candlestick: is a bearish candlestick with a moderate body.
– 2nd candlestick: is a bullish candle with a long body covering the first candle.
- If it appears at the end of a downtrend, the accuracy of the Bullish Engulfing pattern will reach the highest.
- The green bullish candle must be large enough to cover the entire body of the candlestick (regardless of the tail).
- The accuracy of the Bullish Engulfing candlestick pattern will be high when the first candle is a bearish Doji candle.
Market movements when Bullish Engulfing candlestick pattern shows up
In order to have safe transactions when using the Bullish Engulfing candlestick pattern, you need to understand market movements.
– The first candlestick has a moderate body. And the second candlestick has a very long body.
Explanation: A slight bearish candlestick in the downtrend signals a weakening bearish momentum. A bearish candle with a short body shows that sellers are no longer strong enough to push the price lower. A strong bullish candlestick appears right after the bearish candlestick, challenging the previous downtrend. This proves that the buyers have entered and the sellers no longer take the lead.
– The Bullish Engulfing candlestick pattern appears in a long downtrend or a sharp decline.
Explanation: Because the market is in a downtrend, investors often prefer to sell. So the downtrend goes further until exhausted before beginning to reverse. In the event of a sudden sharp price drop, the price may have entered the overbought zone and a reversal is likely to happen.
– The trading volume on the second candlestick is very large.
Explanation: At unusual times, a large volume of transactions may result in a long bullish candle. It shows that strong volatility is occurring and is considered a strong bullish signal.
– The second candlestick body is bigger than some previous ones.
Explanation: Many small candlesticks show indecision. A long bullish candle covering the previous candle cluster indicates that the market has made a decision, which is to follow the bullish trend.
-The Bullish Engulfing candlestick pattern appears at the support.
Explanation: Support is the price zone where investors expect prices to rise. Here, the buying force prevails over the selling force. Most investors will buy when the price enters the support. If the Bullish Engulfing candlestick pattern appears at the support, the price will probably increase.
When combining two candles of the Bullish Engulfing candlestick pattern, we have the Hammer candlestick.
Similar to the price movement of the Bullish Engulfing candlestick pattern, the price goes from bearish to bullish, creating a Hammer candlestick pattern.
The method of capital management
Bullish Engulfing candlestick pattern has high accuracy. So the density of its appearance is quite low during the day. You can use the weekly classic method of managing capital and open 2 orders daily at most.
With the above risk management method, having a 60% winning rate is profitable. By using the Bullish Engulfing candlestick pattern properly, that goal will be easy to accomplish.
Principles help soldiers out of danger in battle. They also help traders avoid risks in a volatile market. Remember that we will have to pay real money in our account for the mistakes we make.
– Only open UP orders when using the Bullish Engulfing candlestick pattern during trading online in Olymp Trade.
– Do not trade 1 hour before and after breaking news released.
– Only open UP orders when the Bullish Engulfing candlestick pattern has been confirmed.
-The Bullish Engulfing candlestick pattern is highly effective when in a downtrend.
Review and analyze opened orders with the Bullish Engulfing candlestick pattern in Olymp Trade on 11/05/2020
USD/JPY currency pair:
Reasons for opening orders: The bullish trend appeared when the previous peak and trough were lower than the next peak and trough respectively. It could be seen that the buyers were controlling the market with bearish candlesticks of relatively long body. Suddenly, a strong bullish candlestick appeared and covered all three previous bearish candles. The Bullish Engulfing candlestick pattern appeared with sufficient conditions to open an UP order safely.
Opened an UP order when the Bullish Engulfing candlestick pattern was confirmed. The results were as expected. I received a profit of 82% of the investment.
Why was there another Bullish Engulfing candlestick pattern but we didn’t open a trade?
This was a Bullish Engulfing candlestick pattern, but I felt the market was about to go sideways. Bullish Engulfing is most effective when in a downtrend. If I opened an order there, the safety would have not been at the highest level so I decided not to trade.
Review and analyze opened orders with the Bullish Engulfing candlestick pattern in Olymp Trade on 12/05/2020
EUR/USD currency pair:
Reasons for opening the 1st order: The downtrend was stable with many consecutive bearish candles. A long bullish candlestick appeared and exhausted the bearish momentum of the previous three candles, forming the Bullish Engulfing candlestick pattern. There was no reason not to open an UP order. And the correct prediction resulted in a profit of 82%.
Reasons for opening the 2nd order: After a successful reversal from down to up, prices started to move sideways. There were consecutive bearish candlesticks and finally a Break Out candlestick appeared. The newly formed Bullish Engulfing candlestick pattern was also a Break Out candlestick, which was a sufficient condition for opening an UP order. The correct prediction yielded a profit of 82% of the initial investment.
One last word
You can apply these candlestick patterns to trade with all assets. Because normally, when each candlestick pattern appears, only one unique way of trading is ideal.
Here, each pattern will be introduced in the safest way. And we will clearly analyze each opened order. The purpose of simplifying these strategies is to make it easier and quicker for readers to understand.
These opened orders are not on a DEMO account, which shows the seriousness in the sharing process. That’s all about the process of trading with Bullish Engulfing candlestick pattern in 2 days, from 11/5 to 12/05.
Every week I will try to share good entry points with candlestick patterns of high winning rate. From there, you will have a clearer view of analyzing the Japanese candlestick chart. Thank you for following up.