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How does the engulfing candlestick pattern work, how to apply it in trading, and what is the difference between bearish engulfing and bullish?
A number of leading brokerage companies have recently launched the ability to visualize candlestick charts in their trading platform.
Candlestick charts are a plus for any trader. Thanks to such charts, trading systems based on candle combinations can be applied, which allows you to extract even more profit during trading.
Types of acquisitions
There are only two types of traders working on the stock exchange. They are called bulls and bears.
Those who do not know why all traders are divided into such categories and are called that way, can find out now. Everything is very simple and clear.
Differences between bullish and bearish engulfing
There is only one difference between bulls and bears. The work of the bulls is always aimed at increasing quotes, the bull always buys a trading instrument.
This is an analogy with the attack of a bull, when the animal attacks, it tries to raise its object of attack and throw it up.
A bear is a player on the stock exchange who sells all the time, works to lower the trading instrument. An analogy to this is a bear attack. He tries to strike with his paw from above.
Candle combinations, which will be discussed in the article, are also divided by analogy into two types: bearish and bullish engulfing.
Absorption combinations make it possible to correctly determine the movement of the chart without the use of any indicators and other tools.
Having learned to interpret the drawing of a candlestick chart, a trader will be able to correctly assess the situation and see the situation that has developed in the market.
Thanks to this, you can maximize the percentage of profitable trades and increase the profit received during operation.
absorptions are different
A candle combination, called absorption, is a situation on the chart when one or more candles overlap previous candles.
- Bullish engulfing - this is the overlapping of a candle, which is directed upwards, a candle, which is directed downwards.
- Bearish engulfing - on the contrary, overlapping with a candle directed downwards, a candle directed upwards.
Having understood the principle of candle formation, a trader will always be able to adequately respond to the situation on the market and make the right decisions.
Applying Bearish and Bullish Engulfing in Practice
To work, you need to open either the trading platform right away, or simply live chart and enable price visualization in the form of candles.
Next, you should determine the direction of the main trend and carefully monitor the chart.
When the main trend is up, you need to wait for a combination called bullish engulfing. It can be found in the following way:
1. On the main bullish trend, there was a correction (price decrease);
2. After the correction, the price starts moving up again, having previously formed a bullish engulfing structure;
3. On the next candle, after absorption, it is necessary to open a deal to buy up.
When the main trend is down, you need to wait for a combination called a bearish engulfing:
1. On a bearish trend, a correction occurs (the price rises);
2. After the correction, the price starts moving down again, having previously formed a bearish engulfing structure;
3. On the next candle, after absorption, we open a deal to buy down.
A trader needs a little practice and he will learn to accurately identify all combinations.
This allows you to trade with 70% accuracy. This result means that the trading strategy copes with its immediate purpose very well.
Thanks to engulfing combinations, it is possible to predict the price movement quite accurately and regularly.
Optimal expiration time and deposit
The expiration period depends on the time period of the chart on which the trade takes place. As a rule, this value should be around 10 candles.
For example, the work goes on the chart with a period of 1 minute, then the period is set to 10 minutes and then we act by analogy.
Trading on the stock exchange exposes the trading account to risks. Due to incorrect trading, a trader can lose it. Experienced traders advise investing no more than 5 percent of the capital in one transaction.
Trading pairs: any;
Working timeframe: any;
Expiration: 10 candles;
Time to trade: except for the release of very strong news;
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