Hello everyone!
Today I want to share with you a very strong pattern that I use myself and that you can find on any chart.
When used correctly, this pattern can suggest the best entry point and possible reversal, potentially promising you good profits.
ID
The engulfing pattern looks like two candles, the first of which is small and the second is large and its body will be larger than that of the first, and the candle is heading in the opposite direction.
The logic of this model is simple: there is no more force left in the market to push the price – the first candle, after which a big one forms and uses the weakness to push the market in the opposite direction.
A couple of important conditions:
There must be a trend before the pattern.
The second candle must be large and have the opposite direction.
Also, the first candle should close almost without shade, that is, to the maximum.
Trading at a floor can bring a lot of losses, as many false signals appear in such a market.
Trade
Market entry is made after the level of the first candle is broken, that is, the market has swallowed the candle and is going in the opposite direction.
The stop loss is placed beyond the high of the first candle.
take advantage. There are several ways to set a taking of earnings.
You can set it to a ratio of 3:1 or more for your stop loss.
Another way is to set a taking profit in the area of the next level. This method can lead to more profit, although it is worth remembering that the market may not reach the level.
Deadlines
The choice of time frame depends on your trading style as this pattern occurs on all time frames.
But it should be understood that the smaller the time frame, the worse the figure will be calculated.
The ideal time frame for trading is 4 hours.
You can choose the one that suits you best.
Conclusions
This pattern, like all the others, provides a guide to trading, but this does not mean that the market wow definitely in the direction you need.
When analyzing, it is worth analyzing the whole picture, do not rely on a single pattern, use indicators.
By operating from the level, this model will be solved more often.
Use the patterns correctly.