What makes an engulfing candle valid?

The body of the second candle must completely 'engulf' or cover the body of the previous candle.

Yes, an engulfing pattern on high volume is much more significant than one on low volume.

Where should I place my stop loss?

Typically, the stop loss is placed just above the high (bearish) or below the low (bullish) of the engulfing candle.

Are engulfing candles better on higher timeframes?

Generally yes, Daily and H4 engulfing patterns have higher success rates than those on 1-minute charts.

Education · Price Action

Engulfing Patterns: The power of a reversal.

An engulfing pattern signals a total shift in market sentiment. It shows one side of the market completely overwhelming the other.

Bullish vs Bearish.

A Bullish Engulfing occurs at the bottom of a downtrend: a large green candle swallows a small red candle.

A Bearish Engulfing occurs at the top of an uptrend: a large red candle swallows a small green candle.

Key characteristics.

The second candle's body must be larger than the first.
It is more powerful if it occurs at a key support or resistance level.
The larger the second candle relative to the first, the stronger the signal.
Confirmation from the next candle closing in the new direction is often advised.

Trading the context.

Don't trade engulfing candles in a vacuum. A bearish engulfing in a strong uptrend might just be a pullback. Look for confluence with higher timeframe trends.

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