Forex Engulfing Pattern Strategy

A forex trading strategy based on Engulfing candlestick patterns. The system consists of 3 indicators: the 100 exponential moving average, the MACD indicator with default settings and the Candlestick_Recognition_Master custom built Metatrader 4 indicator. We will be using this custom indicator to identify Engulfing candlestick patterns on autopilot.

Chart Setup

Indicators: 100 Period Exponential Moving Average, Candlestick_Recognition_Master, MACD (26,12,9)
Preferred time frame(s): 15 min and up
Trading sessions: London and New York for 15 min and 30 min charts. No restrictions for timeframe’s above 30 min.
Preferred Currency pairs: any

Download

Download the Forex Engulfing Pattern Strategy.

Example: EUR/USD Daily Chart

forex-engulfing-pattern-strategy

As shown in the EUR/USD daily chart above, the Engulfing candlestick pattern strategy spotted multiple short signals for the declining EUR/USD rate.

Trading Rules

Buy Trade:

  • Price above the 100 EMA (uptrend)
  • MACD above 0 (short-term bullish)
  • Candlestick Recognition Master indicator shows L_E symbol (bullish engulfing pattern)

==> Open long trade and place protective stop-loss below the most recent swing low point (support).

Price Target: I suggest a risk-to-reward of at least 2, which means you are only risking one dollar for every two dollars of profit potential, or any other profit taking method you feel more comfortable with.

Sell Trade:

  • Price below the 100 EMA (down trend)
  • MACD below 0 (short-term bearish)
  • Candlestick Recognition Master indicator shows S_E symbol (bearish engulfing pattern)

==> Open short trade and place protective stop-loss above the most recent swing high point (resistance).

Price Target: I suggest a risk-to-reward of at least 2, which means you are only risking one dollar for every two dollars of profit potential, or any other profit taking method you feel more comfortable with.

Strategy tip: Turn off all Candlestick Recognition Master indicator alerts (set to false) except the bullish engulfing pattern and bearish engulfing pattern.

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