What it looks like
Two candles. Bullish: a down candle, then an up candle whose body opens at or below the first close and closes at or above the first open. Bearish: an up candle, then a down candle whose body covers the first body entirely. Only bodies count; wicks do not need to be engulfed.
What it means
In one candle the other side wiped out the previous candle's work and more. After a fall, a bullish engulfing shows sellers stopped; after a rise, a bearish engulfing shows buyers stopped. It is a sign the move is tiring, not proof that it has turned.
Bullish and bearish versions
How to trade it
- 1
Confirm: wait for the next candle to close above the pattern's high (bullish) or below its low (bearish).
- 2
Enter on that close.
- 3
Stop: just below the low of both candles (bullish) or just above their high (bearish).
- 4
Target: 2 times the stop, or the nearest swing level.
- 5
Example: a bearish engulfing on US30 1 hour after a rise into the previous day's high spans 70 points. The next candle closes below its low; you sell with a 75 point stop and aim 150 points lower.
A close below the pattern's low (bullish) or above the pattern's high (bearish).
Where it works best
After a clear move into a floor or ceiling. In tight, choppy ranges engulfing candles appear constantly and mean little.
WickSpeak finds the engulfing pattern automatically on any chart and names it on the candles that made it. Next to the name it writes what the pattern is, how to trade it and what proves it wrong, so you never have to guess the rule. In Playbook you can use the engulfing pattern, or any of the 146 patterns, as a condition alongside up to 12 conditions on any of 12 timeframes, then backtest it on past candles with your costs.
Common mistakes
- Counting wicks instead of bodies.
- Trading it mid-range with no move before it.
- Entering on the engulfing close without the next candle's confirmation.
Related patterns
Questions traders ask
What is a bullish engulfing pattern?
A down candle followed by an up candle whose body completely covers the down body. After a fall it hints sellers have been stopped.
Does the engulfing candle have to cover the wicks?
No. The usual rule is body over body. Covering the wicks too makes it an outside bar as well, which is a stronger look but not required.
Is an engulfing candle a reversal signal on its own?
It is a sign the move is tiring, not proof it has turned. We wait for a close beyond the pattern before trading.
Where is the stop on an engulfing trade?
Just beyond the far end of the two candles: below the low for bullish, above the high for bearish.