📊 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.

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.

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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