The engulfing pattern in Forex

The engulfing pattern in Forex

The engulfing pattern in Forex

Candle analysis is popular among traders. The absorption model is one of the most common patterns. Accordingly, you can use it to open trades every day and even several times a day for intraday trading.

The absorption model is formed by two Japanese candlesticks. The body of one of them completely absorbs the body of the other. Moreover, the direction of the trend is determined by the absorption candle. This pattern can be either bullish or bearish.

The color of the candle body is key. If a bullish candle absorbs a bearish one, it means that an upward trend is beginning to develop. If the opposite happens, it means that a downward trend will develop.
Absorption pattern and its distinctive features

absorption model

Let's turn to the screenshot. The classic absorption pattern is shown here. It is practically not found on the market in its pure form. Pay attention to both candles. In the case of a bullish model, the bearish body is completely absorbed by the bullish candle. But there is another important point.

A bullish candle starts with a gap (price gap). Due to this, the faces of the bodies do not touch at all. Of course, such models can be found on the chart, but, as we noted above, this is extremely rare on Forex. More often, you can find the absorption pattern, in which the lower face of the body of a bearish candle is on the same level as the lower face of a bullish one. And the upper edge of a bullish candle will be higher than a bearish one.

The bearish Forex absorption model shown in this screenshot is also unique. Because here it is also formed after the gap. Such situations are extremely rare on the chart. Most often, the upper face of a bullish candle will be at the same level as the upper face of a bullish candle. And the lower edge of the bearish side will be lower than the lower edge of the bullish side.

When does the Forex takeover model appear? It is usually preceded by a trend. For example, if there was an upward trend in the market, then a bearish takeover is formed, which suggests that the trend is changing to the opposite.

If there was a downward trend in the market, a bullish takeover is formed, which indicates that the downtrend ends and the bullish one begins.

Absorption candles are usually formed at levels. This is another important condition. A bearish pattern appears in the resistance area, and a bullish pattern appears in the support area. If this condition is not visible on the Forex chart, it is not recommended to work with such models.
Bearish pattern

The candle absorption model of this type is formed at the top after an uptrend. As we noted above, one of the important conditions for its appearance is that the price should be in the resistance area. Moreover, the stronger the resistance level on the chart, the stronger the pattern itself.

the pattern of absorption

The screenshot shows exactly this model. As you can see, the black body of a bearish candle completely absorbs the white body of a bullish one. After this pattern is formed, the market turns around. It is very important to wait until the second candle closes to confirm the absorption itself.
Bullish takeover

absorption candles
How do I make trading decisions using this pattern?

Professional traders recommend using a daily timeframe or higher. The fact is that on these time scales, the pattern has proven itself and is more or less stable.

You can also use additional indicators in the strategy. These can be, for example, oscillators. Very often, especially after strong trends, the oscillator can go into the area of overbought and oversold. Just when this pattern is formed, the exit from these zones will occur.

As we noted above, the absorption model is formed at significant levels. If this is not the case, it is better to look for other patterns.

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