Engulfing bars

I came upon this thread a few weeks back after searching on Steve Primo's system, basically what has been described here. I liked what he said but always aware of spending money on these systems 'advertised' in webinars.

I started using it and had amazing results in the first week, couldn't believe it and was just awaiting the inevitable, which inevitably happened

I have continued to trial it on the basis of an edge but so far feel that it needs another filter as well as the 50 SMA. This is what I have been trying to find this week.

The main problem appears to be where the trade turns against you on the next bar, and it is difficult to know where to cut your losses or let the trade breathe as you have quite a large stop. My best try so far has been to use an Over bought/sold indicator, have been trying the Williams R, am sure a Stochastic etc would be fine too.

I was going to add to the thread last week but pleased someone has done so to jump start me.

Hope some of the contributors will return.

Cheers

Alan

Hi Alan,
Unfortunately, no amount of additional filters will solve the trade management problem you're talking about.

I, like you, stumbled on this thread while looking for answers to the problem of engulfing bars' tendency to turn around and run against you, regardless of the filter involved. I haven't looked at this thread in years because I found my answers elsewhere(in areas which have nothing to do with engulfing bars)

If it was as simple as increasing the frequency of successes by additional filters, then this thread would have grown to become one of the super-threads(5,000 + posts) of this great forum.

The truth is that the EB is not a system in itself.
It won't , with a bit of tweaking, to set you on the path to decisionless wealth.

The EB is just a trigger to trade. It is a powerful short term signal that can lead to a lot of pips because it announces a dramatic change in sentiment,

But it is, nevertheless, just a trigger. For this reason, can lead to a lot of fake-outs as well(I should know)

It happens to be my favourite trigger.

I believe that the best methods(and I don't mean "systems") are made of 5 equally important parts. The trigger is just one of them
1.A filter
2.A set-up
3.A trigger
4.A trade management plan
5.A position size appropriate to the parts 1-4

A filter (like the 50 SMA) sets the general landscape for the trade. It gives you your direction. A good one provides two things.
A powerful statistical edge and, more importantly, a psychological tool which narrows your focus reduces gives your impetus to trade. In other words, it forces you to become discerning - and therefore confident.

My favourite is the open. Look at the DIBS thread. Go long while the price is above the open and short when it is below. The 50SMA is great for longer timeframes (4hr, daily, weekly, monthly)
I sometimes use two filters but never more. You can filter any method to death if you're not careful. Your filter should suit your trading style. It must compelling to you personally.

A set-up is your primary timing tool. Not the trigger.
My favourite is hammers/shooting stars in a higher time frame but oscillators can be cool too.
This tells you that a meaningful trigger is near and hopefully whether the current market segment is tradeable.
It identifies what segment of the price range you will be attempting to profit from and how large your stops/targets are likely to be.This in turn tells you how large your position will be. The larger the time frame, the smaller the position.

The trigger tells you that the sentiment for your play is currently ideal(as opposed to perfect...no such thing, I'm afraid)
My favourite is the EB but I'm awfully partial to range breaks as well.

None of these instruments are perfect and all require trade management.

Your trade management will be determined by your personality.
I'm an instant gratification trader because...well, because I just am. No idea why.
If it starts to go against me, I exit. I have very little tolerance for a market that isn't moving how I expected. Its my way or the highway. Some days i suffer a death by a thousand cuts but I'm used to the pain now.

Many cannot trade this way but its right for me.
Understanding this is crucial to your success.
Figure out what you are and just be that.

Your position sizing will be determined by factors 1-4. RR will be determined by the strike rate.
And if the RR encumbent on this doesn't suit your personality, abandon the method and find another that does.

Things like timeframe are determined by a combination of personality and lifestyle. There is no perfect time frame for EBs or anything else.
God created all time frames equal. Higher time frames are more reliable but theres a lot less frequency and they have poorer RRs

Also, don't think in terms of pips. Rather in terms of bank percentage.

I trade EBs with 1% of my bank with 1:1 RR.
That doesn't mean others should.

EBs can have a very high strike rate with the right set-ups.

Don't trade Filters alone
Don't trade Set-ups alone
Don't trade Triggers alone
Put them together and use a trade management plan which is appropiate to the demonstrable risk/reward of your particular combination of the three.
A good method will work in any time frame
Its shame there aren't more threads on EBs because they are wonderful triggers based purely on price.
I always get excited when I see one developing.
Higher time framed EBs can be superb set-ups in themselves but never trade them in isolation.

There is no perfect RR for EBs or any other timing tool.

I use EBs to narrow my focus and concentrate on the important stuff( trade management and risk quantification)

I hope this helps you and i hope this thread can sprout new life.


Good luck in your journey.



Ken

In the past I've checked many mechanical systems, but found out that it is difficult to blindly open trade without understanding what happens on the market. As result I started to use a method described in james16's thread (I didn't read it yet, but its idea is clear to me, more or less).

Anyway, after watching the S.Primo's webinar I opened a daily EURUSD chart and marked all engulfing patterns + 50 SMA. I used R:R = 1:1. It worked for the last 2.5 years which were checked, but the total profit was not so big (~ +30%, as I remember). On H1 timeframe - I started to check and stopped - there were too many bad trades. That's why I'm curious if anybody got positive results.

I think that the possible filter would be to use 2 moving averages, like 20 and 50 EMAs (need to check) and open 2-3 trades after each cross, then wait for the next cross. I didn't check the results, but I think it might help, while the strategy will remain simple.

On another webinar (not Primo's) the idea was to use Engulfing with 34 EMA (as I remember) on M10 timeframe and trade until the overall profit will reach +20..+30 pips <- the daily goal.
TP = SL = 30 pips. I don't know whether it works or not. If anybody will check it - please let us know.


Best Regards

Individual candle patterns have no predictive power. So I'm not really surprised by your findings.

That said, it sounds like this strategy is really trading a pullback in an existing trend and there are a lot of threads on FF using different combinations of indicators to trade essentially the same thing.

The important features are the strength of the trend and the depth and duration of the pullback. If these are ok - then you want to enter as it looks like the market is starting to trend again. The actual entry trigger is not very important.

Primo teaches the aggresive approach and the conservative approach to his students as for as bringing stops up or down depending on the direction when applying the rules to the engulfing pattern technique.As for i know he trades the conservative approach himself.

Using his strat #5 there will be more winners than losers but then you have to decide how you want to trade it and how much risk. As for as filters none he uses except the 50sma on this particular strat. The market will do what it wants ---if you wait for a pullback you may or may not get a signal.

Tex

hi pls direct the links for literature of primo thanks

Nb pm me i see what i can do to help. There is some webinars on forex street that are helpful on entry ,buy sell line. but do not actually explain the rules as for as stop placement. This particular video is still up i found on a search and hopefully he doesn't delete it. I'm not posting the link here because of the forum rules .I'm traveling early in the morning again and don't know when i'll be back...may father is real sick. I'll be up for a few hours before i go to sleep. Take care.Tex

Most of his videos are on his web site and his facebook page, there are things he keeps secret on some videos and reveals on others.

To be honest I came the other way, and ended up here where I feel much more comfortable with the quality and quantity of info and options.

Many thanks to all those who have posted since my first post, I think as a newbie here my post was held for approval as all of a sudden there have been a burst of replies which I am now avidly exploring.

Thanks to you all.

Cheers

Alan

Hey All,
I have been trading engulfing candles on daily and h4 for years and just read over the comments hear to about others trading similar.. Here is the thing, I hear people saying it needs a filter.. Let me make it clear, this strategy does not need a filter, just accept that it is profitable but there will be a loss here and there.. I have around a 70% to 80% success ratio and how i trade is much the same.. I accept 2 to 3 losses in 10 and it does not even phase me, it is part of trading.. Heck, sometimes my win ratio is 55% and I still make profit because overall my risk reward is always better overall..

The concerns people have and I know coming from experience is not filters or EMA's or using a indicator to validate your signal is not correct.. The issue is yourself as a trader that we all go through.. Just accept losses will happen and stick to the strategy..

Here is how i trade it as a tip.. Place stop below candle entry or below low if close.. Depending on distance always favor risk to reward here.. So entering on an engulfing place stop below the candle and enter around 5 to 9 pips after candle close.. Second use BE at 35 to 40 pips.. This is logic really, if it is a proper engulfing it will keep going.. BE's do happen though so accept them also.. Sometimes they happen and then the market turns back to the way you wanted, it happens, just deal with it really.. Thirdly take profit when an opposing candle suggests so and never use an indicator to decide.. Lastly do not ever watch the chart, your stop loss is set and your BE number and you just need to check each new candle and that is all.. Now after that count the money you have made each month..

Simple and because it is simple it works... You can also pay attention to structure but overall engulfing's rule in the way of where the market is going to go without even taking notice of them.. So one can also use them as a filter as well, but that is up to you..

Have Fun..

Timon Weller
www.forexreviews.info



Above in the chart image shows how i take signals when it comes to engulfing's.. As you will notice some are not perfect, this is what one needs to train the eye to see, what is valid and what is not is right on the chart every time..

Here an example how easy it is to trade with engulfing bars
GBP/CHF daily time frame
Price is above ema 50 so only long
We see 3 trade's 2 winners, 1 loser
Every week we have many set ups, I follow 16 pairs and a few commodities like oil, gold,

Dutch signals

double bottom with engulfing,cable.....beauty

Two signals right now guys, both with trend lines holding the prices. I only waiting the candle close.
GBPUSD:


USDJPY:

Hi Traders,
I started trading Timon Weller's Engulfing Trader system just over a week ago after the Semafor system I was trading started to fail.
I'm wrapt about how easy the system is and consider it the best for myself. The key to the system is finding the Support & Resistance levels on the Daily Chart, then wait for an Engulfing Candle in the direction of the trade.

The stop is placed above or below of the Engulfing Candle and entry is 10 pips or so on the other side. The trade is made up of two trades the 1st is 1:1 ratio then the 2nd trade is left to run till you get an opposing Engulfing Candle...
Cheers For Now !
Bob

it´s sad but looking at:

http://www.forexfactory.com/bobhowson#53

it seems that this doesn´t work also.



what went wrong?

Last week was a horror week for me, but will dust myself off and try again...
Have a good one

i wish you the best!

Hi Bob
-i enjoyed the music on your website . it is beautiful.
-in regards to trading i have a question : what is your money management system. can you please detail it ?
-i suggest checking Strat thread, he is a musician too.

Take care

any improvement on this thread?

You learned from Primo?

www.protraderstrategies.com