Trading strategy · Price Action

Bullish Engulfing at Support

Price action: read the candles, not the indicators.

Level: BeginnerTimeframe: 4H to DailyStyle: SwingMarkets: All markets

What it is

A bullish engulfing pattern is a green candle whose body completely covers the previous red candle's body, showing buyers overwhelming sellers. On its own it is common and unreliable. At a proven support level, after a decline, it becomes a high-quality reversal signal with a natural stop just below the pattern.

How it works

• Find a support zone that has caused bounces before.
• Wait for price to decline into that zone.
• Look for a red candle followed by a green candle whose body fully engulfs the red body.
• Enter at the open of the next candle (or on a break of the engulfing high).
• Stop just below the low of the pattern; target the previous swing high.

Pros

• No indicators needed
• Very clear stop placement
• Works on every market and timeframe

Cons

• Engulfing candles are common, so context is everything
• Large candles can make the stop wide
• Some subjectivity in judging "support"

Common mistakes

• Trading engulfing candles in the middle of nowhere
• Ignoring the size of the stop relative to the target
• Entering before the engulfing candle closes

Lesson transcript

Lesson ten, our final strategy: the bullish engulfing at support. No indicators this time. Just price, and the story the candles tell. This market fell hard, then bounced near sixty. That bounce tells us buyers care about this area. We mark it as a support zone. Price drifts back down into that zone. Now we watch the candles closely. A red candle, sellers still pushing. Then a green candle opens low, and closes above the entire body of the red one. Buyers completely overwhelmed sellers. That's a bullish engulfing. Location is everything here. Engulfing candles happen all the time. But one that forms right at proven support, after a decline, is a strong signal. We buy at the next open. Our stop goes just below the low of the pattern. If price breaks there, the buyers' show of strength failed. Our target is the previous swing high. And buyers follow through. Price climbs back to the target and beyond. One candle pattern, in the right place, gave us a clean trade with clear risk. The rules. Support first. Then the engulfing pattern. Enter on the next open. Stop below the pattern low. Target the previous swing high. And that completes the course. You now know ten strategies, and the risk rules that hold them together. Practice them on a demo account, keep a journal, and stay disciplined. I'm proud of you. Happy trading.

More lessons

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