First of all, they talk a little about how to recognize a valid engulfing candlestick pattern for this strategy. You see the picture below.

Bullish engulfing pattern


Bearish engulfing pattern

However, in the trading market, the opening price of the engulfing candle can be equal to the closing price of the first candle in the pattern.

The timeframe for trading is M15.

Trading principles

For buy orders
  • First, there must be a bullish engulfing candlestick pattern.
  • The engulfing candle (2nd candle) must have volume above 100.
  • After the candlestick pattern is formed, you can enter a buy order as soon as the candle closes.
For sell orders
  • First there must be a bearish engulfing candlestick pattern.
  • The engulfing candle (2nd candle) must have volume above 100.
  • After the candlestick pattern is formed, you can enter a sell order as soon as the candle closes.
Exit command
  • The profit target is set at the limit of 5 pips. However, if the next 2 candles have passed the entry point but have not reached the target profit or stop loss, you should automatically exit the order when the 2nd candle closes.
  • Stop loss is placed below the engulfing pattern (including the shadow) for buy orders, and above the engulfing pattern for sell orders. As shown below:


Below is an example of the USDJPY M15 pair with 10 signals from the engulfing candlestick pattern with volume above 100:


And below is the profit and loss statistics of all 10 orders:

Let's talk a little bit about Volume in this strategy

Volume plays an important role in creating a higher probability of success for a trading strategy. At the time of strong trading volume, the probability of the strategy to place a profit will be higher and faster.

Note when trading

Another problem is that you should not trade in currency pairs with high spreads. Looking at the stop loss and take profit for the strategy, everyone can understand the reason, right?

This strategy will be more suitable for a ranged sideways market than for a trending market. However, if you trade according to the trend, you should trade when the pullback ends and the market returns to the main trend or trend continuation signal. Don't trade while the pullback is moving.

Do not trade when the pattern has a doji candle. Because it will make the signal from the engulfing candlestick pattern not so strong to trade anymore.

Pay attention to the news, your strategy is easy to stop loss when the market releases the news. So it's best to avoid the time of news.

Capital Mangement

For this strategy, there are a few cases where if you have 2 consecutive loss orders you will need 4 to 5 profit orders to be able to maintain profits. You can keep the same volume when trading so it will be easy to manage capital. However, if you want your profits to cover your losses, you can use the Martingale (folding) method to achieve this.