Nothing lasts forever and so the trends use to change their direction. The points of such reversals seem to be ideal trade entry opportunities. But how to predict a change in the trend?
There are some patterns that can help traders in finding the trend reversal points. And today I will present one of such patterns. It is called the bearish engulfing pattern.
How to recognise the bearish engulfing pattern on the Binomo platform
There are several requirements for the bearish engulfing pattern to appear.
This is a pattern that signals the reversal of the trend. It forms at the top of the uptrend when the bulls begin to lose control over the market. The bears come in and drive the price down.
Then, there are two candles that form the pattern. One is bullish and the second one bearish. The condition that must be met is that the bullish candle is much shorter than the following bearish one. Moreover, the green candle cannot be a special Doji candle.
The name of the pattern is the bearish engulfing pattern. This means that the green candle should be entirely absorbed by the red one. And the reversal is assumed to be stronger when the bearish candle is significantly longer.
The bearish engulfing candlestick pattern
Let’s quickly summarise information about the bearish engulfing pattern.
It forms during the uptrend at its highest point.
It consists of two candles. The first one is green, the second red.
The bearish candle’s opening is lower than the closing of the bullish candle. And it closes higher than the bullish one opens. With liquid assets like currency pairs, it is usually enough if the body of the red candle is significantly bigger than the one of the preceding green candle.
How to trade with the Bearish Engulfing pattern on the Binomo platform
The most important thing is to recognise the bearish engulfing candlestick pattern. But you have just learned how to do this. Now, you have to wait for the next candle to develop. The bearish candle is expected as a confirmation of the downtrend.
This is a moment you should open a sell position.
Consider the chart below.
You can notice a temporary uptrend. Then it comes to exhaustion and the bearish engulfing pattern develops. Right after the red candle is finished, you enter the trade for a price decrease.
Reversals of the trend create perfect opportunities to open trading positions. You can use special patterns like the one described in this article to predict the change in the price direction.
The bearish engulfing candlestick pattern develops at the top of the uptrend. It is relatively simple to identify and pretty effective in use.
Bear in mind the first candle in the pattern is not supposed to be a Doji.
Open short positions that last at least the time that is equal to your chart time frame. You can use a bearish engulfing pattern with other techniques such as support/resistance levels or Fibonacci retracements to gain better winning percentage.
Remember, there is the Binomo demo account where you can practice employing the bearish engulfing pattern in your trading. Tell us in the comments section below about your experiences with this candlestick pattern.
Enjoy your trading!
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