I just prepared the first material in a series I’m creating about candlestick techniques, and I wanted to share something that many novice traders often overlook: the engulfing pattern.

This pattern is quite useful for detecting trend reversals. The idea is simple: when you see a candle that completely covers the previous one, both the body and the wicks, you’re looking at a possible reversal. It typically appears at the end of a strong trend, acting as a market warning signal.

The interesting part is that the engulfing candle works in both directions. If you were in a downtrend and suddenly a bullish candle appears that engulfs the previous one entirely, that’s a potential bullish reversal. The same applies in reverse.

Now, how to trade it. When you identify this pattern, you have two options: enter as soon as it forms or wait a bit longer for the price to test the midpoint of the engulfing candle’s body before opening a position. Personally, I prefer the second option because it reduces false signals.

For the stop loss, I recommend taking the full wick of the pattern and adding one-third or half of the body. This gives you enough room to avoid being swept out by quick market movements.

One important thing: this engulfing candle is a tool, not a guarantee. It works best when combined with other analyses and depends heavily on your personal trading style. What works for me on 4-hour charts might not work for you on 15-minute charts.

This is lesson number 1 of what I hope will be a complete series. I wanted to start with something fundamental that everyone should understand. If you like the content, follow and share your own experiences—that’s what helps improve these materials. See you in the next one.