One of the most famous candlestick patterns is the Engulfing candle. Engulfing candlesticks are considered a sign of a trend change and often appear late in the trend. The Engulfing candlestick is a pattern that is particularly popular with contrarian traders.
If you use the EA (automatic trading software) for MT4 introduced this time, you will be able to automatically trade the bullish and bearish engulfing candles and score profitable winning trades in the Forex market on a regular basis.
The engulfing candle consists of two candlesticks. The characteristic of this pattern is that the body of the first candlestick fits within the body of the second candlestick.
In the bullish engulfing candle pattern, the first bar is negative while the second bar is positive and wraps up the entire body of the negative candle. A bearish engulfing candlestick pattern is the opposite and forms when the first candlestick is positive and the second candlestick is negative.
This EA will place a buy order if the following conditions are met (sell order is the reverse):
- Bullish engulfing candle appears
- RSI is oversold
This entry logic is only checked when a new candlestick occurs.
This EA closes the trade using a take profit stop loss specified by the parameters. An ATR stop loss can also be used.
Candlestick patterns like the engulfing candles have a clear mechanism. The fact that the body of the candlestick has fallen completely within the body of the next candlestick means that buying or selling has increased sharply.
This EA uses the RSI to increase the effectiveness of the engulfing patterns. As you can see, there are more candlestick patterns that work well than wrapping lines, so it's a good idea to study them.
- UseATRStop - Defines whether the EA uses ATRStop or not. If true, the EA sets stoploss based on ATR.
- ATR - Multiplier of ATRStop.
- RSIPeriod - Periods for RSI calculation
- OverBoughtLine - If RSI is over this line, RSI is in an overbought condition.
- OverSoldLine - If RSI is under this line, RSI is in an oversold condition.
Note: Backtest results may be optimized. Also, the backtest results may differ from the trade results when using a live trading account. Please understand this point before you use the EA.
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Do you need help with installing this indicator into MT4 for Windows or Mac OS? Our guide HERE will help you.