Engulfing Forex Strategy For Metatrader 5

The Engulfing Forex strategy for Metatrader 5 allows market participants to initiate a buy/sell trade at an opportune time.

The strategy combines an engulfing price pattern and a nice blend of technical indicators to offer a powerful buy/sell alert bias.

You’ll be able to spot the bullish and bearish engulfing patterns on nearly every currency pair on MT5.

A bullish engulfing candle takes place when the real body of a bullish candle totally envelopes the real body of the previous bearish candle.

On the contrary, a bearish engulfing forms when the real body of a bearish candle totally envelopes those of a prior bullish candle.

Lets adapt the engulfing candle in determining the prevalent market trend.

Trade Setup 

MetaTrader 5 Indicators: Money Flow Index.ex5 (Parameters Modified; Period=36), MinMax.ex5 (Default Setting)

Trade Style: Scalping, day trading, swing trading

Trading Sessions: London | New York | Tokyo

Currency Pairs: Majors, cross pairs, exotics

Platform: Metatrader 5 (MT5)

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Download the Engulfing Forex Strategy For Metatrader 5

Buy Trade Example: AUDUSD, H1 Chart

Fig. 1.0

Trading Strategy Rules For Buy and Sell Trades Explained

Buy Entry

Enter a buy trade if the following trading conditions are met:

  1. If a bullish engulfing candle forms on the activity chart as illustrated on Fig. 1.0, price is said to be making a bullish correction, hence a signal to go long on the designated forex pair.
  2. If the medium sea green line of the MinMax custom indicator stayspositioned fairly below the price bars as shown on Fig. 1.0, price is said to be driven higher i.e. a trigger to buy the selected currency pair.
  3. If the dodger blue line of the Money Flow Index Metatrader 5 forex indicator breaksabove the 50.00 horizontal level (see Fig. 1.0), the general market sentiment is said to be bullish, therefore a buy alert will suffice.

Suggested Stop Loss for Buy Entry: Place stop loss below medium-term support.

Suggested Exit Strategy/Take Profit for Buy Trade

Exit the buy trade if the following trading conditions are met:

  1. The formation of a bearish engulfing candle could be an indication of a weaning momentum in the current trend, as such an exit or take profit is advised.
  2. If the medium sea green line of MinMax custom indicator reverts to orange red as exemplified on Fig. 1.0, it is pointing to diminishing bulls strength, therefore an exit or take profit is recommended.
  3. Watch out for the dodger blue line of the Money Flow Index indicator falling below the 50.00 level, if this holds, we strongly recommend an exit or take profit stance.

Sell Entry

Open a sell trade if the following trading conditions are met:

  1. If a bearish engulfing candle forms on the activity chart as depicted on Fig. 1.1, price is said to be making a bearish correction, and as such it is worthwhile to go short on the currency pair of interest.
  2. If the orange red line of the MinMax custom indicator stays aligned somewhat above the candlesticks (refer to Fig. 1.1), market sentiments are said to be favoring lower prices, and thus a sell alert is advised.
  3. If the dodger blue line of the Money Flow Index indicator dips below the 50.00 horizontal level (checkout Fig. 1.1), the overall market sentiment is said to be bearish, and therefore a sell alert will do.

Suggested Stop Loss for Sell Entry: Place stop loss above medium-term resistance.

Suggested Exit Strategy/Take Profit for Sell Entry

Exit the sell trade if the following trading conditions are met:

  1. If the bullish engulfing candle forms on the activity chart during a bearish trend, it is pointing to a likely bullish reversal, therefore an exit or take profit is recommended.
  2. If the orange red line of the MinMax forex indicator reverts to medium sea green during the course of a bearish trend, bears are said to closing their market positions increasingly, thus a trigger to exit or take profit at once.
  3. If the dodger blue line of the Money Flow Index indicator readjust to go above the 50.00 level as shown on Fig. 1.1, it is signaling weakness in bearish pressures, hence an exit or take profit will suffice.

Sell Trade Example: AUDUSD, H1 Chart

Fig. 1.1

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Download the Engulfing Forex Strategy For Metatrader 5

MT5 Trading Indicators Used For This Strategy

The Money Flow Index or MFI is a Metatrader 5 forex indicator that gauges the rate at which money is pumped into a currency pair and then taken from it.

The MinMax indicator is used to describe the minimum and maximum construct of some price over a desired period, and such value can be used for further trend estimation.

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