Engulfing candle

What it is

A bullish engulfing candle is a green candle whose body completely covers the previous red candle's body. A bearish engulfing is the opposite: a red body covering the previous green one.

It shows one side overpowering the other within a single period, which is why it often marks a turn when it appears at a level.

How to spot it

• The second candle's body must cover the first candle's body (wicks don't count for most traders).
• It matters most after a move into support, resistance or a zone, not in the middle of a range.

How to use it

• At a key level, enter on the close of the engulfing candle or on a small pullback into it.
• Stop beyond the engulfing candle's wick; target the next level.

Common mistakes

• Trading every engulfing candle regardless of where it forms.
• Ignoring the higher-timeframe trend it is fighting.

Related