Hey, I’m sharing something that has worked pretty well for me in my trades: understanding the engulfing candle is key to detecting trend reversals.

Basically, this pattern appears right when a trend is coming to an end. Imagine the market drops sharply and suddenly you see a candle that completely covers the previous one, not just in the body but also in the wicks. That’s a bullish engulfing and it’s a sign that buyers are taking control. The opposite happens with a bearish engulfing at the end of an uptrend.

To identify it properly, the important thing is that the new candle fully covers the previous candle, including the high and low points. Nothing can be left out; it has to be a complete engulfing.

Now, regarding the trading strategy with this pattern, you have two options. You can enter immediately after the engulfing candle forms, or wait for the price to retest the middle of that candle’s body and only then open a position. I personally prefer the second because it’s safer.

For the stop loss, here’s the trick: take the wick of the engulfing candle and add between one-third or half of that candle’s body. This way, you prevent liquidity sweeps from knocking you out of the trade. This level of protection is quite solid.

What I like about this pattern is that it works across different timeframes and markets. It’s not the only condition to enter, but it’s a good confirmation of reversal if you combine it with your own analysis. In the end, each trader interprets these signals in their own way, so experiment, test on a demo, and see what works best for you. This kind of technical knowledge is what helps us improve our trading day by day.