Common Candlestick Patterns on Forex: Engulfing Bars

I will write about candlestick patterns and examples on this blog because these are very useful and effective concepts. The success rate is high because I and some other price action traders can tell that the price contains the enough information for trading decision. However, the tools should use with other indicators or support/resistence level or any other analysis tool to suppourt the decisions. Today I want to write most common and known candlestick pattern that called engulfing bars.

It is easy to determine that there are two engulfing pattern. These are bearish and bullish engulfing patterns. Below the pictures that define these bars. The easy definiton is the second bar completely engulf the previous bar, if the second bar bearish it is called bearish and vice versa. In the below picture, black bar is bullish bar and white bar is bearish bar.



To use this bars some key criterions should be observed if a strong signal is wanted. My personal look at these bars are like that:

1- In retracement levels with trend direction.

2- Key support and resistence levels for the reversal signals are very important. Bearish engulfing bars on resistence levels and bullish engulfing bars on support levels are stronger.

3- Volume indicators can give very good signals. If the engulfing bar occur with the higher volume, the reversal pattern can be seen more probably.

Here is an example that bearish engulfing bar: