The engulfing bar setup

The engulfing bar is my favourite setup of the lot. They are very simple to spot and what I need to see for it to be a valid engulfing bar, is the high and low to be greater than the high and low of the previous candle, the reverse of an inside bar.

There are two types of engulfing bars:

  • Bullish engulfing bars (BUEB), these need to be traded from swing lows to go long
  • Bearish engulfing bars (BEEB), these need to be traded from swing highs to short the market

The two examples of an engulfing bar are shown below:

2013-11-18_1658_bueb12013-11-18_1709_beeb_

I also need the engulfing candle to close within the last 1/3 of the candle inline with the direction of the trade.

Again, just like the pin bars I trade the engulfing bars as reversal candles ( not continuation candles) and so not only must they be large in size but form at swing points.

To take a short trade the engulfing candle must be bearish and form at a swing high, this is known as a bearish engulfing bar (BEEB). Example below;

bearish engulfing bar

Example of a price action setup known as a. bearish engulfing bar

 

To take a long trade the engulfing candle must be bullish and form at a swing low, this is known as a bullish engulfing bar (BUEB). Example below;

bullish engulfing bar

Example of a price action setup known as a bullish engulfing bar

Check out my video on engulfing bars.

FOREX TRADING STRATEGIES – The engulfing bar price action setup guide.

 

Module 1: The Basics

Module 2: Market Analysis

Module 3: Price Action Setups

Module 4: Chart Setup

Module 5: Trade Management

Module 6:  Trade Psychology

Module 7: Continue your learning