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📊 Price Action·intermediate

Engulfing Candle

A candle whose body fully swallows the previous candle's body — a strong reversal signal.

An engulfing pattern is two candles. The second candle's BODY completely covers the first candle's body (wicks don't matter). A bullish engulfing is a red candle followed by a green candle that opens below the red close and closes above the red open. A bearish engulfing is the opposite. Engulfing candles are strong reversal signals at the end of trends. The second candle "swallows" the first — meaning one side (buyers in bullish, sellers in bearish) completely overwhelmed the other. That's a clean shift in momentum. The bigger the engulfing candle, the stronger the signal. A tiny candle engulfed by a huge one is much more meaningful than two small candles.

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Real trade example

Oct 2023 bullish engulfing on EUR/USD daily at 1.0450 support marked the bottom of the move. Anyone who entered on the engulfing got 400 pips before the next meaningful retrace.

Frequently asked about engulfing candle

What is an engulfing candle in trading?+
A candle whose body fully swallows the previous candle's body — a strong reversal signal.
When will I see engulfing candle used in real trading?+
At the end of trends, at support/resistance levels, right after news releases that shift sentiment.
What is the most common mistake traders make with engulfing candle?+
Counting any green-after-red as engulfing. The BODIES must fully engulf. If the second candle doesn't cover the first body, it's not engulfing — it's just noise.
What do experienced traders know about engulfing candle that beginners don't?+
Engulfing candles at major daily/weekly levels are some of the highest-probability entries in trading. Mark them and wait for a pullback to the engulfing candle's 50% mark to enter — it gives better risk/reward than chasing the close.

Related terms

Candlestick

beginner

A single price bar that shows open, high, low, and close for a given time period — the foundation of technical analysis.

Hammer

beginner

A candlestick with a small body near the top and a long lower wick — a bullish reversal signal after a downtrend.

Doji

intermediate

A candlestick where the open and close are almost equal — indecision between buyers and sellers.

Lower High

beginner

A swing high that's lower than the previous swing high — one of the two confirmations of a downtrend.

Lower Low

beginner

A swing low that's lower than the previous swing low — one of the two confirmations of a downtrend.

Market Structure

intermediate

The framework of swing highs and lows that defines whether a market is trending up, trending down, or consolidating.

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