Engulfing
Definition
Engulfing is a two-candle reversal pattern in which the body of the second candle completely covers the body of the first and points the opposite way. Bullish engulfing: a red candle, then a green one with a larger body, a signal for a rise. Bearish engulfing: a green candle, then a larger red one, a signal for a fall. The pattern is strongest at a support or resistance level after an extended move.
What the pattern looks like
Engulfing consists of two adjacent candles of different colours. The main condition: the body of the second candle completely covers the body of the first. Wicks are not counted; only bodies are compared.
| Feature | Bullish engulfing | Bearish engulfing |
|---|---|---|
| First candle | red, small | green, small |
| Second candle | green, body covers the first entirely | red, body covers the first entirely |
| Where to look | after a decline, at support | after a rise, at resistance |
| Signal | reversal up | reversal down |
The larger the second candle relative to the first and the smaller its wick in the signal direction, the stronger the pattern: the market did not just cover the previous candle but closed at the edge of the range.
What makes engulfing strong
By itself the pattern appears on any chart dozens of times a day, and most cases mean nothing. Context matters more than shape.
- A level. Engulfing at support or resistance with a past reaction is a working signal. In the middle of nowhere it is noise.
- The preceding move. Before bullish engulfing there should be a run of red candles, before bearish a run of green ones. There is nothing to reverse if there was no move.
- The higher timeframe. Engulfing against the trend on M5 and M15 is more likely a pullback than a reversal. With the higher-timeframe trend the pattern plays out more often.
- The size of the second candle. If it covered not one but two or three previous candles, the signal is stronger.
Trade example
GBP/USD, timeframe M5. Price fell for five candles in a row and reached a support it had already bounced from twice. The sixth candle is red and small, the seventh opened lower but closed green above the body of the sixth: bullish engulfing at a level. At the open of the eighth candle the trader opens a buy with an expiration of 10–15 minutes, that is two or three candles: a reversal from a level rarely plays out in one.
Had the same pattern appeared in the middle of the decline, with no level beneath it, the trade would be skipped: it could be an ordinary pause in the move.
Engulfing in the terminal
In BinoView Supercharts the pattern is spotted by eye at the candle close: the timer next to the candle shows how many seconds remain, and the entry at the open of the next candle comes out precise. Levels for context come from the Average Support Resistance and Adaptive S/R Zones indicators. If you want to automate the search, an engulfing detector with level and trend filters can be built in the neural network bot builder: the logic only has to be described in words.
How it differs from harami and the pin bar
All three are reversal candlestick patterns, but they are built differently. In engulfing the second candle is larger than the first and covers it. In harami it is the reverse: the second candle is small and fits entirely inside the body of the first; it is a pause signal, not a reversal. A pin bar is a single candle with a small body and a long wick; the reversal is shown by the wick, not the body. Engulfing is considered the strongest of the three because the opposing side did not merely stop the move but covered it entirely. The other patterns are covered in the candlestick patterns article.
Frequently asked questions
What is the difference between bullish and bearish engulfing?
The direction of the second candle. In bullish engulfing the first candle is red, the second is green and its body covers the first one entirely: buyers have taken over, a signal for a rise. Bearish is the reverse: after a green candle comes a large red one, a signal for a fall. Both patterns are looked for at the end of a move, not in its middle.
Do I need to wait for the second candle to close?
Yes. Until the candle closes, its body can shrink and the engulfing will not happen. The trade is opened at the open of the third candle, after the second has closed and covered the body of the first. The candle close timer in the terminal helps with this.
Does engulfing work on a 1-minute chart?
It does, with a caveat: on M1 the pattern appears often and most cases are noise. Only engulfings at a level with a past reaction and after a run of same-colour candles are selected. Without context the pattern on M1 gives a win rate around 50%, with context noticeably higher.