If you like to learn about the strongest candlestick patterns, you are in the right place. There are two candlestick patterns that when some special conditions (that I will explain in this article) are met, are the strongest signals to take positions. If you wait for these candlestick patterns to form on the charts to take positions, you will be a winner most of the time. And if you control some of the possible losses with a proper stop loss and money management strategy, then there is nothing to be worried about.
What are these strong candlestick patterns?
- Bullish Engulfing Candlestick Pattern
- Bearish Engulfing Candlestick Pattern
I start with Bearish Engulfing Candlestick Pattern that traders also call it Bearish Engulfing Candle. But before doing it, let me tell you something:
Forget about the stupid trading strategies like moving averages, and crazy lagging indicators. Japanese Candlesticks are the only real time indicators that have the highest success rate, if you know how to choose the best and the strongest patterns formed by these outstanding Japanese invention.
Bearish Engulfing Candlestick Pattern
This candlestick pattern forms by two candlesticks. The first candlestick has to be bullish, and the second one bearish. The second candlestick has to cover (engulf) the first candlestick body, but if it also covers the first candlestick’s shadows as well, the pattern would be stronger:
What Makes a Bearish Engulfing Candlestick Pattern Stronger?
The first thing that makes this candlestick pattern stronger is the first and second candlesticks’ sizes. The pattern is stronger when these two candlesticks are bigger. For example, on the above image, I have marked the strongest Bearish Engulfing Candlestick Pattern. However, there are a few more instances of this pattern on the same chart, but they are not as strong as the one I have marked:
The other important factor that you can consider to pick the strongest Bearish Engulfing Signals is through using Bollinger Bands:
A strong Bollinger Upper Band breakout formed by both of the first and second candlesticks is an important factor that determines the strength of the sell signal.
In the example of the strongest engulfing signal that I showed you on the first chart above, there is a strong Bollinger Upper Band breakout formed by both candlesticks. This breakout makes the signal much stronger, and causes traders to take their short position with more peace of mind:
Bullish Engulfing Candlestick Pattern
This pattern is exactly like the first pattern, but from the opposite direction. Therefore, the first candlestick in this case has to be bearish, and the second one, bullish.
Like the bearish form of this pattern, candlesticks’ sizes, and also Bollinger Lower Band Breakout are two important factors to determine the strength of the bullish form of this pattern too:
If you like to be a profitable trader, you should forget about all the other candlestick and chart patterns, and stick to the patterns I described above. At the same time, you need to follow the longer time frames like daily, weekly and monthly.
This is true that it usually take a long time for the above patterns to form on the longer time frames, but it is worth to wait for them, because they really work and make profit.
You will lose when you push yourself to get in the markets, when no strong signal has formed on the charts. When you wait for a long time, and no signal forms, you get frustrated and want to take a position anyway. That is the time that you will lose. You have to be disciplined enough to wait for the strong signals to form on the charts. Even if no signal forms for several days, weeks or even months, you should not lose your patience, and you should still wait for a strong signal to form.
This is what professional trading means.
If you develop such a discipline in yourself, and at the same time you wait for the strong Bearish and Bullish Engulfing Candlestick Patterns to form on the charts, you will always be profitable.
The other thing you must note is that even when you think a strong signal is formed on a chart, still you must not take too much risks. In each position, you should not risk more than 1-3% of your capital. At the same time, you must always protect your capital through setting proper stop loss orders, in case you trade with the platforms that allow you to do it. In case you trade through banks and with your bank account, then you must have a stop loss in your mind, and you should close your position once the price hits the stop loss level.
You will never regret if you follow the above tips and rules.