Bearish engulfing pattern appears on the top of a trend and it indicates the trend reversal. Similarly, bullish engulfing pattern also indicates reversal of bearish trend and it appears the bottom.
Benefits of Using Bearish/Bullish Engulfing Indicator
It is quite a time taking process to manually locate bearish and bullish engulfing patterns but Nano Trader platform has automated the process and the patterns automatically appear on the chart with a single click. Key benefits of using these indicators are briefly discussed below:
- It is a high probability trading pattern that reflects the trading psychology of majority of the traders.
- This is actually graphic representation of statistical analysis and the pattern has survived in speculative trading over centuries.
- It clearly reflects the beginning of a new trend so the potential gains taken through such trades are very high as compared to the risk.
- It shows directional bias of price action and the information can be used to limit the losses as well.
Using Bearish/Bullish Engulfing Indicator
Bearish engulfing and bullish engulfing indicators are built-in features of Nano Trader platform. They generate high probability long and short trade entries on any financial instrument in the platform. Bearish engulfing indicator generates selling pattern when a small bullish candle is covered by a bigger bearish candle. Similarly, bullish engulfing pattern appears when a small bearish candle is followed by a bigger bullish candle. Now, we will show how long and short trades are taken using the discussed feature in Nano platform:
Bearish Engulfing Indicator
Taking example of GBP/USD, we look into the futures chart of 335 minutes. After enabling the feature of ‘Bearish Engulfing’ from WH Patterns, potential patterns are automatically highlighted on the chart. After locating the pattern, we look to trade it.
GBP/USD Futures Chart 335 Minutes for Sep
The pink highlighted two bars indicate bearish engulfing pattern on the chart above. Stop loss is placed few ticks above the recent swing high while entry order is placed few ticks below the low of bearish engulfing candle while profit target is placed at immediate support or swing low.
Bullish Engulfing Indicator
Taking example of GBP/USD, we look into the daily futures chart. After enabling the feature of ‘Bearish Engulfing’ from WH Patterns, potential patterns are automatically highlighted on the chart. After locating the pattern, we look to trade it.
GBP/USD Daily Futures Chart for Sep
The green highlighted two bars indicate bullish engulfing pattern on the chart above. Stop loss is placed few ticks below the recent swing low while entry order is placed few ticks above the high of bullish engulfing candle while profit target is placed at immediate resistance, consolidated area or swing high.
The above discussion shows how Nano Trader platform has made it convenient for the traders to analyze any financial instrument and find the high probability entries in semi-automatic mode. However, it is worthy to mention that every strategy or indicator has drawbacks, losing trades and drawdown. So every trader needs to use common sense and capital preservation to remain successful.