Bullish and Bearish Engulfing Candlestick Patterns Means Trend Reversal
Trend trading is what makes a fortune. If you can master the art of predicting potential trend reversals, you can make a fortune trading any market. And when it comes to predicting trend reversals, Engulfing Candlestick Pattern is one of the most popular candlestick trend reversal patterns!
This is a two stick pattern meaning it takes two days for the pattern to develop. The pattern?s name comes from the fact that the signal day completely engulfs the setup day. So the candle body and the wick on the signal day engulfs the candle body and wick on the setup day.
In case of the bullish engulfing pattern, the first day is down. But on the second day, heavy buying starts in the market. So much buying in the market takes place that it completely surpasses both the open and the high. On the other hand, in case of the bearish engulfing pattern, the setup day candle is bullish. On the signal day, heavy selling starts in the market forming a bearish candle that completely engulfs the first day candle.
The power of the engulfing candle is increased by its size. The bigger the engulfing candle, the more significant it will be. A large bullish engulfing candle says the bulls have seized control of the market after a downtrend. Similarly, a large bearish engulfing candle says bears have taken control of the market after an uptrend.
When you combine the engulfing candlestick pattern with a indicator like the CCI, you can get very quick and powerful trend reversal warning.
So, in case of a bullish engulfing pattern, on day one bears dominate the market. The open is near the high. Bears push down the prices all day until the close ends up near the low. On day two, the bears again push down the prices a little bit before the bulls come into action and start pushing the prices up never stopping. The bulls exceed the prices of the previous day and even push the prices up over where the trading started the previous day.
When it is a bullish engulfing pattern, it means the bulls are going to control the market for the coming days. Similarly when it is a bearish engulfing pattern, it means the bears will control the market for the days to come.
Article Source: FxTradingStock.com
About the Author
Mr. Ahmad Hassam has done Masters from Harvard University. Get these 3 Swing Trading Systems FREE. Master these highly profitable Candlestick Patterns with this FREE 82 page PDF Candlestick Guide.
by: Ahmad Hassam
Total views: 35
Word Count: 399
Date: Wed, 24 Nov 2010
Publish/Share this article
To use this article on your site click here to get the HTML code
Rating: Not yet rated
Login to vote
Related Articles
Tips On How To Profit In Virtual Stock TradingLet's Choose A Forex Broker.
Some Tips On How To Forex Trade Online To Know
Stay Away From Requotes In Forex.
Helpful tips for Finding the right Forex Trading Program
Forex Currency Trading Software program -- Pick the Proper 1!
Forex Trading Strategies - What To Do When You Loose
Currency exchange Robot Trading Systems - Get the Full Benefit!
