Understanding The Use Of Engulfing Candle Indicator

One of the key areas you need to understand as a forex trader is the engulfing patterns, and the reasons are not far-fetched. Understanding engulfing patterns would give you an idea when or when not to enter a trade position. Plus, it would also give you an idea of a currency pair to invest your money. What’s more? You would also get to understand asset prices and the right prices to place a buy order.

Engulfing pattern is grouped into two forms – bearish and bullish patterns. Veteran traders explore the use of engulfing pattern as reversal signals; thus, they are able to recoup bountifully from the investment. So, how does an engulfing pattern occurs? And the benefit from the pattern? How do I use the engulfing candle indicator to read trade patterns and make more money? How do I adjust the indicator to suit my trading preferences? Will this indicator make our TOP 10 Forex Indicators? These and many more questions would be answered in the course of this article; so read on to find out!

What Are Engulfing Patterns?

Engulfing patterns or candlestick patterns are the formations of two candles on the trading chart. At the very basic, engulfing patterns usually occur whenever a candle totally “engulfs” a previous candle. The actual cause of the engulfing pattern is still being investigated by veteran traders; however, there are indications that it is due to a change in sentiment. An engulfing pattern is a pointer to the fact that there is a reversal in the direction of the current trend.

During a downtrend, and particularly when an asset price is selling off, there is a formation of bearish candles followed by a bullish candle. The bullish candle then engulfs the bearish candle. In the forex market, this pattern is referred to as the bullish engulfing pattern. On the other hand, during an uptrend, the exact opposite occurs; this is referred to as a bullish engulfing pattern. While traders have the exclusive right to set trading strategies with respect to engulfing patterns, but the underlying engulfing pattern concept still prevails.

It is actually very difficult to keep track of engulfing patterns – it is practically impossible to sit in front of your laptop or PC monitoring trends and tracking the exact spot a candlestick pattern will occur. Therefore, this is exactly where an engulfing candle indicator comes handy. Off course you can use this indicator with other premium indicator such as the chande kroll stop indicator. The indicator is an excellent tool to behold, as it can automatically help you identify candlestick patterns at all times. Incorporating this tool into your trading arsenal will also help you determine trade setups that are profitable.

Bar Completion

The candle you see on the chart cannot be said to have attained an engulfing status except the bar is complete. The indicator lags behind by one bar once the bar is complete. Immediately there is an occurrence of an engulfing pattern; an arrow would be drawn on the previous bar.

Engulfing Candle Indicator Alerts

The engulfing candle indicator will send you an alert whenever an engulfing pattern occurs on the chart. The indicator will send you an alert in the following ways:

1. Text messages through the MT4 SMS alert system
2. Email messages through the MT4 email alert system
3. Popup window in the MT4 trading terminal.

best engulfing indicator

How to Install Engulfing Candle Indicator

Here’s how to install this indicator on your MT4 trader platform:

1. Download the indicator on your desktop and save the file where it would be easy for you to remember
2. Copy the indicator to your MT4 indicator file
3. Restart the MT4 trader and search for the engulfing candle indicator
4. Once you see the indicator, right-click on it to activate it
5. Attach the indicator to any currency pair of your choice
6. Adjust the indicator settings to suit your trading preferences and press “ok” to continue
7. The indicator should appear on your MT4 trading chart.

How to Remove the Indicator

There are times you need to do away with the engulfing candle indicator – in such a situation, the only option open to you is to uninstall or remove the indicator from your trading chart. Below is how to remove the indicator from your chart:

1. Open your MT4 trading chart
2. Go to your indicator list and look out for the engulfing candle indicator
3. Right-click on the indicator and press “remove”
4. The indicator should disappear from your chart.

Trading Strategy Using the Engulfing Candle Indicator

Following the steps below to understand the engulfing candle indicator trading strategy:

1. Buy Signal: Once you sight a strong buy signal line on the engulfing candle indicator, you should place a buy order trade. However, ensure you apply your stop loss as needed.
2. Sell Signal: Place a sell trade order only when an asset price moves to the selling zone with breakout level.
3. Time frames: 1-minute, 5-minutes, 1-hour, 4-hours, 8-hours, daily, weekly, and monthly.

TIP: If you are using the engulfing candle indicator use it together with the MT4 spread indicator.

Summary of Engulfing Candle Indicator

If you want to improve your trading strategies and earnings, downloading and installing an engulfing candle indicator is a no-brainer. The indicator is used to determine the occurrence of candlestick patterns on your MT4 trading chart. Customizing the indicator to suit your trading preferences is actually very simple and straightforward.

While this indicator may potentially increase your earnings if you follow through with the strategy discussed above, we suggest that you do not use it in isolation. You can download and install other indicators like the breakout indicator, resistance, and support indicators to increase your chances of winning in a trade.

Additionally, if you take a look at our platform, there are several technical indicators and tools you can use alongside the engulfing candle indicator. Using all of these technical indicators at once is a sure way to improve your earnings. So check them through this link here.

What’s your experience using the engulfing candle indicator? Let us know what you think in the comment box below on our Best MT4 Indicators website.

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