Engulfing bars

Artamon

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Hey all,

I've been live forward testing this for a while now (with a small account) and find it very reliable. I'm not gonna spew out figures and stats as they are only pertinent to me and my trading psyche.

I trade daily engulfing bars. Basically, near the close of the daily bar, if the current bar engulfs the previous bar then i place a limit trade in the direction of the engulfing bar, approx 30-50 pips from the hi/lo, depending on the direction. Only the body of the current bar needs to "engulf" the body of the previous bar. There are a few other PA things to look for, but this is the CRITICAL rule that needs to be satisfied before I consider a potential trade. I use no other indicators except for pivot points. I use these as a guide for TP and SL levels, although lately i've been using the ATR of the last 5 bars to give me my SL.

I've attached a couple of examples of what I mean.

Does anyone else trade something similar?

Cheers,
Art...
 

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I trade daily engulfing bars. Basically, near the close of the daily bar, if the current bar engulfs the previous bar then i place a limit trade in the direction of the engulfing bar, approx 30-50 pips from the hi/lo, depending on the direction.

Art,
seems like a valid enough method. Congrats, it's certainly KISS !
But I'm confused about your Entry - you use a Limit order, so that means you wait until price has gone past your projected Entry point and then enter a Limit to get in on a pull-back ?
You don't use Stop Buy/Stop Sells as Entries to get into the trade as soon as price hits your projected Entry ? What if there's no pullback, you'll miss the trade altogether ?

r_e
 
engulfing bars are just one of the key reversals signal to look out for. some others to look out for are harami, dojis, piercing/dark cloud cover and morning/evening stars. Of course there also must be a prior trend before that. it would also be ok to use other indicators to confirm these candle signal before plunging in.
 
Hey r_e,

Art,
seems like a valid enough method. Congrats, it's certainly KISS !
But I'm confused about your Entry - you use a Limit order, so that means you wait until price has gone past your projected Entry point and then enter a Limit to get in on a pull-back ?
You don't use Stop Buy/Stop Sells as Entries to get into the trade as soon as price hits your projected Entry ? What if there's no pullback, you'll miss the trade altogether ?
r_e
As far as I'm concerned you cannot beat KISS. We, as people, are quick to dismiss the simple in favour of something more complicated. If it's more complicated it's obviously better, right?

Anyway, I don't think I was clear in my explanation. For example, with a bullish engulfing bar I wait for the price on the new bar to exceed the engulfing bar's Hi by 30-50 pips. Once it does, I enter. There's no waiting for pullbacks or anything. Similar for bearish engulf. Once price goes beyond the Lo of the engulfing bar by 30-50 pips, I take the trade.

This figure of 30-50 pips is something I've played with to try and weed out false signals. My testing shows that a high percentage of trades that go past this figure end up going in my favour to some degree. The key is to pick a TP you're happy with and run with it. I use 50 pips for the more volatile pairs (GBPUSD, GBPJPY etc) and 30 pips for all others. It's not an exact science, but does seem to keep me out of some losers.

Thanks for your comments.

Cheers,
Art...
 
Hey swordfish,

engulfing bars are just one of the key reversals signal to look out for. some others to look out for are harami, dojis, piercing/dark cloud cover and morning/evening stars. Of course there also must be a prior trend before that. it would also be ok to use other indicators to confirm these candle signal before plunging in.
What you say is completely valid, but also where I think a lot of traders fall over. I know I did. There's so many candle setups that occur, that a new trader can easily see these setups every day. IMHO, it would be more prudent to pick 1 or 2 setups that occur with some regularity and try and trade them, and only them. In my mind, that's KISS to a tee.

As far as indicators go, i gave up on them a long time ago. Price Action is King, IMHO. Not even an indicator can argue with PA.

Cheers,
Art...
 
Hey r_e,


As far as I'm concerned you cannot beat KISS. We, as people, are quick to dismiss the simple in favour of something more complicated. If it's more complicated it's obviously better, right?

Anyway, I don't think I was clear in my explanation. For example, with a bullish engulfing bar I wait for the price on the new bar to exceed the engulfing bar's Hi by 30-50 pips. Once it does, I enter. There's no waiting for pullbacks or anything. Similar for bearish engulf. Once price goes beyond the Lo of the engulfing bar by 30-50 pips, I take the trade.

This figure of 30-50 pips is something I've played with to try and weed out false signals. My testing shows that a high percentage of trades that go past this figure end up going in my favour to some degree. The key is to pick a TP you're happy with and run with it. I use 50 pips for the more volatile pairs (GBPUSD, GBPJPY etc) and 30 pips for all others. It's not an exact science, but does seem to keep me out of some losers.

Thanks for your comments.

Cheers,
Art...

Ah, I get you; so it's really a mental Stop Buy/Sell entry based on the momentum of PA.
Very similar to what I do, except I usually pre-set my entries to kick in automatically, but I think we're thinking along the same lines.
A simple, clearly defined entry point, which if hit, gets us into the trade.
And if it doesn't get hit, we sit on our hands rather than chasing every signal flashed up by some spurious indicator software.

best,
r_e
 
You lost me on the rules a bit.

What time frame are the charts you posted in ?

Are you saying you trade daily bars or engulfing bars at the end of the day ? :confused:
 
Read trader Dantes threads...he has various set ups like yours

and

james16 Chart Thread

will save you unnecessary time re-inventing the wheel
Good luck :-}
 
Hey Pedro,

You lost me on the rules a bit.

What time frame are the charts you posted in ?

Are you saying you trade daily bars or engulfing bars at the end of the day ? :confused:
I'm trading engulfing bars on daily TF.

Cheers,
Art...
 
Hey Neil,

Read trader Dantes threads...he has various set ups like yours

and

james16 Chart Thread

will save you unnecessary time re-inventing the wheel
Good luck :-}
I am familiar with the james16 stuff. Pin bars are also something i look for in addition to engulfing bars. With respect to re-inventing the wheel, just because you give a man the tools, doesn't mean he can build you a house. I think that, to a certain extent, each trader must do the "donkey work" to understand and comprehend what it is they are undertaking. For example, a lot of the james16 stuff is in lower tf's. For me, lower tf's are trading suicide. The strategy could be foolproof, but it just doesn't work for me. And then, there's no guarantee that the foolproof strategy will work on the higher tf's that i prefer. I totally understand what you mean, but people think that something that works for trader Bob will also work for trader Bill. That's just not so unless Bill and Bob are the same person.

Thanks for the pointer to Dante's thread - will check it out.

Cheers,
Art...
 
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