Engulfing candlestick binary options strategies
When you have an asset that is moving upward in price, you will find that most of the candlesticks that are appearing are white. You will have a line with an upward trend consisting of mainly white candlesticks, and then, up at the top, there will be a big black candlestick that completely covers the body of the last white one.
This is the bearish engulfing candlestick and it usually means that the price is about to drop. There is also a bullish engulfing candlestick where the price is dropping and the last black candlestick is completely covered, or engulfed, by a big white candlestick. This means the price is about to go up. They show all of the same information as a line chart, but with some added features. And because they are color coded, they make it much quicker to analyze a chart and get a feel for what sessions are like in between the distinct timeframes that are measured.
Because they rely heavily on trader emotion , they are a good tool for evaluating the ultra short term, and this is why we have this method coupled with 60 second binary options. This method works under three main conditions: If you have these three, you have the basics in place for a trend reversal.
This method, like any other method of predicting the movement of price, is not perfect. The main drawback is that the reversal that is likely to occur does not have a guaranteed length of time to go with it. This is why we use 60 second binaries. The reversal could last a few seconds , it could last for hours.
Statistics say that they last more than two or three minutes most of the time, and to cover ourselves, we use the smallest timeframe that is most widely available: An engulfing candlestick is a powerful trade signal when used in the right context.
A deeper look at this type of candlestick pattern is covered in A Powerful Candlestick Price Pattern. The pattern combined with some other filter, such as a trend, or highly likely reversal points, creates a very powerful and easy to spot strategy.
When viewing a candlestick charts , there are two types of engulfing patterns, bullish and bearish. A bullish pattern is when the body of an up candle completely envelops the body of the down candle just before it. In other words, a large down candle followed by a larger up candle. A bearish pattern is when the body of a down candle completely envelops the body of the up candle just before it; a large up candle followed by a larger down candle.
An engulfing candle shows a strong shift in direction. Yet, these patterns show up quite often. A strong shift in direction is only relevant there is some type of context. I like to use engulfing pattern during trends for example. Once an uptrend has begun, if during a pullback move lower within the overall uptrend a bullish engulfing pattern occurs, this is a potential trade signal.
The bullish engulfing pattern, during an uptrend, indicates the pullback is likely over and that buyers have jumped back into the market. If one occurs, the pullback has likely ended and the downtrend is likely to resume as the pattern indicates sellers have aggressively jumped back into the market. The basic engulfing-with-trend strategy is to utilize bullish engulfing patterns within uptrends, and bearish engulfing pattern within downtrends.
In order for an uptrend to be in play, the price must have made a higher swing high and higher swing low. In order for a downtrend to be in play, the price must have made a lower swing low and a lower swing high. Here are some examples. The scales on the charts have been removed as this strategy can be used on any time frame. My preferred method is to use it as a day trading strategy, using a 1 or 5 minute chart.
Figure 1 shows the basic setup.