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Engulfing bars

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  • First Post: Feb 7, 2009 1:10am Feb 7, 2009 1:10am
Hey all,

I've been live forward testing this for a while now (with a small account) and find it very reliable. I'm not gonna spew out figures and stats as they are only pertinent to me and my trading psyche.

I trade daily engulfing bars. Basically, near the close of the daily bar, if the current bar engulfs the previous bar then i place a limit trade in the direction of the engulfing bar, approx 30-50 pips from the hi/lo, depending on the direction. Only the body of the current bar needs to "engulf" the body of the previous bar. There are a few other PA things to look for, but this is the CRITICAL rule that needs to be satisfied before I consider a potential trade. I use no other indicators except for pivot points. I use these as a guide for TP and SL levels, although lately i've been using the ATR of the last 5 bars to give me my SL.

I've attached a couple of examples of what I mean.

Does anyone else trade something similar?

Cheers,
Art...
Attached Images
Quoting Artamon
Hey all,

I've been live forward testing this for a while now (with a small account) and find it very reliable. I'm not gonna spew out figures and stats as they are only pertinent to me and my trading psyche.

I trade daily engulfing bars. Basically, near the close of the daily bar, if the current bar engulfs the previous bar then i place a limit trade in the direction of the engulfing bar, approx 30-50 pips from the hi/lo, depending on the direction. Only the body of the current bar needs to "engulf" the body of the previous bar. There are...
Hello Artamon,

Bullish and Bearish Engulfing Candlestick Patterns are reliable.

The second real body must engulf the prior real body (it need not engulf the shadows). This is one of the criteria for an engulfing pattern (see attached picture).

Using ATR for Stoploss is a very good idea.

Wish you all the best with your trading method.

eTrader
Attached Image (click to enlarge)
Click to Enlarge Name: Engulfing patterns.jpg Size: 13 KB
Your first chart labels a bar that is not an engulfing bar. The low is higher than the previous bar's low.
Quoting brianduffer
Your first chart labels a bar that is not an engulfing bar. The low is higher than the previous bar's low.
For a bullish engulfing pattern:
Previous candle has a range1: (Open1 - Close1)
Engulfing candle has a range2: (Close2 - Open 2)

If range2 > range1 then bullish engulfing pattern.

Further: Low3 > Low2

The real body of the engulfing candle must engulf (wrap around) the prior real body (it need not engulf the shadows).

The Open of your engulfing bar was a bit higher than the close of the previous bar.
So in that case no bullish engulfing pattern.

eTrader
Perhaps I am mistaken...

Outside Bar, also called a Wide Range or Engulfing Bar, is a bar with a high that is higher than the previous bar and with a low that is lower than the previous bar thereby engulfing the previous bar. Since the open and close are close together on the marked bar, neither the buyers or the sellers are in control and the market is undecided which way to go.

When the open is in the bottom quarter/third of the bar and the close is in the top quarter/third of the bar, it is said to be bullish engulfing with the buyers in control. When the open is in the top quarter/third of the bar and the close is in the bottom quarter/third, it is said to be bearish engulfing with the sellers in control.



Another definition used for this bar – especially if candlestick charts are used - is that the open and close have to engulf the previous bars open and close and not just the high and low of the bar. With this definition, the wide range bar or engulfing bar does not need to have a higher high or lower low to qualify. The first definition most probably came about with bar charts where it is harder to notice the open and close.
Quoting Artamon
Hey all,

I've been live forward testing this for a while now (with a small account) and find it very reliable. I'm not gonna spew out figures and stats as they are only pertinent to me and my trading psyche.

I trade daily engulfing bars. Basically, near the close of the daily bar, if the current bar engulfs the previous bar then i place a limit trade in the direction of the engulfing bar, approx 30-50 pips from the hi/lo, depending on the direction. Only the body of the current bar needs to "engulf" the body of the previous bar. There are a...
Your first engulfing bar does not fit your definition.
The second one look like it may not either- it's hard to tell.
Hey bill,

Quoting billbss
Your first engulfing bar does not fit your definition.
The second one look like it may not either- it's hard to tell.
I only take into consideration the body of the candle itself, not the hi/lo. Also, in testing, whether the open is slightly higher/lower than the prev close (by a pip or two) really doesn't make that much of a difference. Let's not get stuck on semantics. It's more important that the shape of the engulfing bar look right in relation to the bar it is engulfing. The shape of the candle shows the sentiment. In my first example, the shorter bottom wick of the engulfing candle compared to the prev candles shows +ve sentiment, so when this candle engulfed, it was a valid signal for me.

Cheers,
Art...
I have noticed these bars and noted how profitible they are, and I like your way of trading them. What do you use for a stop loss?
G'day Dreamliner,

Quoting Dreamliner
I have noticed these bars and noted how profitible they are, and I like your way of trading them. What do you use for a stop loss?
Generally, I use 80% of the ATR of the last 5 days. With some of the more volatile pairs, you may have to set a more realistic SL if the ATR value is low.

Cheers,
Andrew.
For how many times you hit the stop loss?

Or the win/loss ratio?

Cheers
i trade something similar on daily and 4hr, if you use a 50sma and only go long above and short below you'll improve your win rate
I'm looking at this on shorter TFs as entry triggers. I'm also collapsing bars to show reversal and engulfing patterns. Often you will see a retracement of the engulfing bar. You can average in or wait for a pullback to a limit order level.
Quoting Thruline
I'm looking at this on shorter TFs as entry triggers. I'm also collapsing bars to show reversal and engulfing patterns. Often you will see a retracement of the engulfing bar. You can average in or wait for a pullback to a limit order level.

This is one of my favorite Japanese Candlestick patterns.

What we have here is really 2 patterns in 1. This is both a valid bullish engulfing doji pattern and a vallid high close doji pattern.

Many Price Action only traders will have both a pattern signal and an entry signal. They will wait for the price to trade back down below the high of the engulfing candle (into its body) to enter long, rather than chase price. Therefore it is possible to get a valid pattern signal and not a valid entry signal.
Attached Image (click to enlarge)
Click to Enlarge Name: Doji 2.png Size: 69 KB
Wyckoff VSA: Always FIBbing, but never lying.
Engulfing patterns work really well but you need to watch a few point, there are generally 2 types of set ups, a reversal and a trend continuation. Marking up the key s/r area on the next higher TF will help to give confluence to reversals and for areas to take profit...

Here's some recent trades I have taken on AU 4hf, look how the 50sma acts as a trend direction filter and the dashed key s/r levels work as targets...

less is more in trading and with some tight money management you could trade this alone

http://i1222.photobucket.com/albums/...ells/au4hr.png
GU set up this week, just some basic understanding of the market, s/r will get you some decent winners, yoou only really need 2 of these trades a week, and you will pay a lot lot less in spreads than chasing the pack down on the 15m chart.... of course you can get your set ups from the 4hr and enter on the 15m if you wish

http://i1222.photobucket.com/albums/...s/guengulf.png
Here's a webinar worth watching if you like simple trading and consistent profits,

http://www.fxstreet.com/webinars/ses...a-7b44ff944b3a
S&P500 been ranging, nice rejection off previous resistance and bearish engulfing, should be good for 80 pips...

http://i1222.photobucket.com/albums/...24at104433.png
If begins flat? It happens that immediately after Engulfing patterns begins Flat......

darrenlittle please tell me, I can apply this method to the H1 ?
  • Post #19
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  • Edited 7:23am Apr 25, 2011 7:03am | Edited 7:23am
Quoting Zvezdochot
If begins flat? It happens that immediately after Engulfing patterns begins Flat......

darrenlittle please tell me, I can apply this method to the H1 ?
no reason why you cant use it on the 1hr... demo it and see what your results are, only going long above a 50 sma and short below would help filter out losing trades

but the whole point of the thread is to move tothe longer tf's... less spreads to pay, less time in front of the charts and more reliable signals... it is hard to move to higher tf's psychologically but once you are there trading is a much more relaxed affair
ECHF 4hr short today, not a great engulfing , I like them a bit larger than that, but had over confluence, might be good for 60 pips..

http://i1222.photobucket.com/albums/...25at115935.png
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