Bullish Engulfing – In the market, many chart patterns have formed as usual. In those chart patterns, one pattern has a different role to play. That chart pattern is called bullish engulfing. This chart pattern formed on the bottom of the market and after formation, the market can take the reversal from the bottom.
The market follows the chart pattern well if all conditions are matched. If a single chart pattern has not performed according to market structure then maybe the chart pattern will work. Bullish Engulfing is known as a reversal chart pattern because its work suspends the downtrend.
Bullish engulfing is a highly reliable candlestick chart pattern, which indicates after formation market can move upward. But while doing trade on it keep one thing in mind in the market there are no sure-shot candlestick chart patterns that can give you a proper signal.
We can predict the market movement according to previous market behaviour. If the market has given respect to the bullish engulfing in the past time. Then there are huge possibility to market will also give respect again the chart pattern.
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Formation of Bullish Engulfing on chart
In the market, a trader should consider how the bullish engulfing performs in the market. If the trader doesn’t know how bullish engulfing forms on the chart and performs according to the market. Then there is no chance the market gives any chance to the trader become a successful trader.
Now come to know, how the bullish engulfing form on the chart. Bullish engulfing has two candlestick combinations one is red and the second one is green.
The red candle performs first and immediately green candle is also performed. The red candle has a small body and is weak but the green candle has approximately 20% extra body from red.
In the chart pattern, green candles break high and low its prior red candle and give close above the red candle. If Engulfing is not breaking the high or low of its prior candle then there is no chance the market will react to that chart pattern.
Things to consider Bullish Engulfing
- It has the first candle in red colour.
- It has a second candle in green colour.
- The second green candle completely engulfs the red body.
- The second green candle opens a little bit gap down and closes above the red candle.
Bullish engulfing performance on the bottom of the market. You must get in touch with the chart because after formation you can predict market can go upward at any time. Because it shows the seller has given up and the buyer has the power.
So the buyer will pull the market upside. The market has no emotion but it gives respect to the candlesticks. If you have a grip on the chart then you will catch that chart pattern.
How to Take Entry and Exit on behalf of bullish engulfing
On the bullish engulfing, you should check that all of the criteria are matched according to your setup. You know very well it’s a two-candle combination reversal chart pattern. It has two candles, the first candle is red and the second candle is green. the green candle gives a close above the high of red.
Entry – To jump in the trade there are many methods, but we will talk about only the traditional method for entering this trade. Traders should wait for the green candle to close. After that, you should take entry in the next candle that breaks the high of the prior green candle.
Secondly – You must wait for the closing of the green candle above the high of bullish engulfing. Immediately closing after you can take a buy order on the high of candle.
Stop Loss – Sl decided according to the market movement and depended on the bullish engulfing candles. Traders should set stop loss below the engulfing candles based on the closing. If buyers are in strong strength then the stop loss will never hunt. Many trader follow their stop loss according to market trends.
Exit – Exit is an important part of every trader. If you don’t know where to exit then how you will get success in the market? I see many traders who have no patience to ride the movement of the market. I recommend that you ride your trade to exit at least a 1:2 risk-reward ratio.
If you have taken the entry at $100 and you placed your stop loss at $96, then your target or exit point will be $108, This is a good risk-to-reward ratio. Most traders have followed it for a long time.
