If you have been trading in forex for a while, you must have encountered an engulfing candlestick pattern. In this pattern, the next candle engulfs the previous candle. It is an indication that the current trend is about to get reversed. But to detect the engulfing candlestick pattern, it might take you a while to spot a valid engulfing pattern if you go manually. That’s where the engulfing indicator comes in.
Working of Engulfing Indicator for MT4:
When you apply the indicator to your charts, it will start scanning for the valid engulfing patterns. There are two types of engulfing patterns.
- Bullish Engulfing
- Bearish Engulfing
The indicator will automatically plot arrows to show where it spots an engulfing pattern. In the bullish engulfing pattern, a bullish candle will engulf a bearish candle. And in the case of a bearish engulfing candle, the bearish candle will overtake the previous candle’s body.
Settings of the indicator:
In the settings of this indicator, you have the option to change the following settings.
Alert On – You can turn the notification on or off.
Colour Bulls – Color of the arrow representing Bullish Engulfing.
Colour Bears – Color of the arrow representing Bearish Engulfing.
Trading Strategy for Engulfing Indicator:
The engulfing pattern shows a possible trend reversal, as stated initially. If the indicator has detected a bullish engulfing pattern in a downtrend, then there is a possibility of a trend reversal from bearish to bullish.
Then you can place a buy order.
If the indicator has detected a bearish engulfing pattern, the trend will now get reversed from bullish to bearish. Then you can place a sell order at that point.
To decide the targets for your order, you can use the Fibonacci extension levels.
Final Comments:
Using this indicator in your technical analysis can save you a lot of time and give you profitable trades. It would help if you also used this indicator with other indicators.
To download the indicator for free, you can click on the link below.