ENGULFING TRADING SYSTEM: LOGIC AND OVERVIEW

The logic of the author of the Engulfing Trading System is that she thinks that traders are too focused on the risk: reward ratio because they believe the price will reach the level of profit-taking they want. But in reality, the price does not show that way and will return to hit the stop loss most of the time. That is to say, our expectation of price to reach our take profit is unrealistic.

This system will use trend and Engulfing candles to follow the trend. Note that the Engulfing Candle is a very strong reversal candlestick pattern, but the best way to capitalize on it is by following the trend: Find Bullish Engulfing in an uptrend to Buy, and Bearish Engulfing in a downtrend to Sell.


Talking briefly about the author, this female Trader used to spend 10k USD to learn a market course that includes only free knowledge that anyone can read on babypips and trading forums. She lost another 10k USD when applying the system she was taught to trade real. She realized that this guy was just an incompetent Trader and a scammer like dozens of other fraudulent Traders. And Engulfing Trading System was her early success.

ENGULFING TRADING SYSTEM: WHAT IS THE ENGULFING CANDLE PATTERN?

Bearish Engulfing is a candlestick pattern consisting of 2 candles: the first is a bullish candlestick, the second one is a bearish candle and it is important that it covers the entire length of the first candle. Bearish Engulfing is a strong reversal candle, showing that the uptrend has been exhausted and is about to turn down.


In contrast, the Bullish Engulfing candlestick is a bearish-to-bullish reversal candlestick pattern, consisting of a bullish candlestick that covers all previous bearish candles.

The traditional way to trade with Engulfing candles is to place a Buy stop on top of Bullish Engulfing and Sell stop on the bottom of Bearish Engulfing.

ENGULFING TRADING SYSTEM: AVERAGE PROFIT

Author's profit statistics using Engulfing trading system in recent years:

  • September 2018: + 26%
  • October 2018: + 15%
  • November 2018: -3%
  • December 2018: + 11%

That is, she has only tested the Engulfing Trading System for over 4 months of trading real, and such time is not enough to prove that the system is profitable in the long term. However, you just watch the Buy-Sell method of this system.

Below is a screenshot of the author's transaction history from September 7, 2018, to October 4, 2018, using the Engulfing Trading System:



ENGULFING TRADING SYSTEM: THE METHOD OF PLACING ORDERS

The author only uses the phone to enter orders with the Engulfing Trading System, an interesting detail that is not very relevant

The engulfing trading system works well with USD, EUR, GBP, and JPY pairs.

The engulfing trading system is only used on the H4 timeframe.

The way to enter an order is as follows:

  • Add EMA 30 (exponential ma) to the chart
  • Just Follow the Trend
  • Enter a Buy order at the opening of the next candle after the Bullish Engulfing formation above the 30 EMA. Or Sell at the opening of the next candle after the Bearish Engulfing candle completes below the 30 EMA.
  • Use Fibonacci Retracement (Fibonacci Retracement) to stop loss and take profit


Here I only use Fibonacci 0, 100, 150, and 200 levels. Basically, when we see an Engulfing candle complete, we wait for it to close and then enter Buy / Sell at the next candle. Stretch the Fibonacci from the top to the bottom of the 2nd candle in the Engulfing candlestick pair, stop loss at Fib 0, take profit at Fib 200.

The strength of this system is that it filters the trend by 30 EMA (Sell only when the price is below 30 EMA, or Buy when the price is above 30 EMA), and use Engulfing candle to signal entry. SL and TP points are determined carefully and have a very high probability of achieving, at least compared to the TP points we imagine on the chart.

ENGULFING TRADING SYSTEM: EXAMPLE

AUDJPY H4:





The price is below ema 30, the current candle is complete, bearish engulfing, enter a Sell order at the Next candle. Stretch the Fibo to determine the SL TP: SL at Fib 0 and TP at Fib 200. Move SL to 100 when the price hits Fib 150.

GBPCAD H4:


Buy opportunity with Bullish Engulfing, the principle of determining SL TP is similar. This command has TP.

GBPAUD H4:


Buy opportunity with Bullish Engulfing, this order has TP.