Sorry to hear about your weekend HOG. If he were mine I might have broken in the golf clubs lol (just kidding well sort of) Glas mine are 1 and 4. I have a few years to worry abou tthat.
Yunny has been posting some stuff that I must say wow good job Yunny. I must say Yunny I knew you were a good trader but I like you style very similar to the way I trade yet very different. Thanks for posting I have learned some things
though I haven’t got a nephew, I was a bit unprepared too. Yunny, would you expect a retracement where the “trader family” could latch on to this trade?
I see price heading to the 1.27 level…
decided to long it back - the eu pairs- as nothing other stuff for today. out from aud/us short and can’t add one more usd/cad short. if that remains the only reason, it can be very fragile. I also have a pendig order on eu/gbp if it happens to be a double top/daily.
I drew a trendline on eur/cad daily. today, we are exactly there, where the long-trend can continue on.-if my eyes are right.
Afternoon everyone. Wishing you all a good week 
Sorry to have taken so long to get back.
ENGULFING PATTERNS
So moving on to the first of our Two Candle Patterns, we meet The Engulfing Patterns. According to Mr candlesticks, the Engulfing Patterns are a MAJOR REVERSAL signal. They can be Bullish or Bearish, so we will start with the BULLISH ENGULFING PATTERN first.
BULLISH ENGULFING PATTERN
As mentioned at the start, an Engulfing Pattern is a TWO candle formation, and again, according to Mr Candlesticks, (which may shortly be abbreviated to Mr Candles, or just Mr C ) there are 3 criteria for an engulfing pattern. They are;
The Engulfing Brothers:
Again I can almost sense your admiration for the artist.
In a real chart, it looks like this:
As you can see, we have two examples on this chart. In both cases the prior market move was a DOWN move, and at the bottom of each move, a large bullish candle completely engulfs the last bearish candle. REMEMBER, the BULLISH candle only has to engulf the BODY of the last BEARISH candle, it does NOT have to engulf the shadows of the last bearish candle as well.
Another point to be noted is that a bullish engulfing pattern MUST come at the bottom of a down move for it to be a Bullish engulfing pattern. Look at this diagram and see what the problem is;
Got that???
Another point to remember is that, as with ALL candlestick formations or signal, it is best to act upon these signals when they help to CONFIRM A CONFLUENCE of events. This could be prior support, a fib level, a trend line etc. The more indicators you can get to line up in your favour the better, and an engulfing pattern is just one.
Acting on the strength of an engulfing pattern alone, in the same way as acting on any one indicator alone, can sometimes be a bit of a stab in the dark. As we can see from a chart that yunny posted not to long ago in reference to a different subject, the chart contained a great example of a failed bullish engulfing pattern, which I think I noted at the time;
Tomorrow night I’ll do the Bearish Engulfing then I’ll add in what Mr C has determined what would make these patterns more likely to actually work and then hopefully we can throw it open to discuss how we think we would actually go about trading these patterns.
I’m saying I’ll do the Bearish tomorrow because there is something else \i want to discuss tonight if I get time. So I’ll go get cracked on with that just now.
Ok, what you are looking at in this picture is a 1 Hour chart of today’s London/New York sessions.
Obviously the London session came first so that is the zone shaded in yellow, and then half way through that, New York Kicks in ( area shaded in white ).
At 8:10 am today I shorted this pair looking for 1-2915 from 1-2974, with a stop at 1-3005. I then left the house, got to work at around 9 am, checked the charts and price had hit my target already, + 60 ish, so all is well.
So at that point I make a mental note to short the pair again, just before New York open, as long as the pair have moved back up slightly. At around 1:40 pm I check the charts and sure enough the price HAS moved up around 1-2952. But then a guy gets in the taxi and by the time he has worked out where he wants to go, got there and decided it was the wrong place, then we’ve actually got to the right place, it’s now 2:40 pm.
I check the charts and what’s happened??? Yep, price has slumped again. And I missed it !!! Bloody customers, who needs them?
So the point of this is that over the last few weeks, I’ve been thinking that New York PA pretty much mirrors London PA, not all the time, but a good proportion of the time. London goes up then down, New York goes up then down. London goes Down then up, New York goes down then up.
Now obviously to confirm the relationship I’d need to check back on the charts, but any views on it would be interesting.
Incidentally, I can only run that trade sessions tool on a 1 Hour chart at the highest, doesn’t work on any higher time frame.
Its an interesting theory hog… kind of like looking at multiple tf trading. High’s and low’s within each TF… or ‘fractal’ in nature… hmm. :33:
I donno… something like this? 4h & daily EU. Fractal high and low on multiple longer tf’s will give you the probable high’s and low’s. Just thinking out loud? Can’t pick the high or low of the swing but pretty close?
EDIT: Must be due a bounce now (03:14 GMT) … good hunting on the Asian 1h. :21: Stop hunt then long is my best guess from 2865… I need reading glasses it seems… 2847. Trying to take a fix off 4h and ‘myopic’ is not a good call LOL!!!
Sorry i didn’t get to answer you last night RC. Going by the time of your EDIT i was safely tucked up dreaming of finer things at that point.
So it may be an interesting, or useless, thing to watch for the next day or two. Where does price go, not so much the numbers as just the directions, in london trading, and then does new york follow?
Hhmm, not a great deal of movement EU from London open to pitch my “mirrored” trading sessions theory against. Small move down so far, so we’ll see what New York does. NY may hold the move for today if London is flat. We’ll see what happens.
Pretty undecided about PA for “mirror” trade. Since price is up on the open I’ve put a demo order in to buy at 2888 (currently 2896). Looking for 2925, stop around today’s open 2875 ish.
Good chance the stop may be a bit tight considering london dropped nearly 40 pips from the open, but looking for new york overall to dip from the open then rally over 1-29
Might get some grief around here Hog?
Did notice that price was struggling above 1-29 RC, don’t really think the “mirror” theory holds much weight. It will work sometimes but random at best I think.
Anyway, that’s what demo accounts for LOL!
Was going to close it when it was 1-2907 but let it go “just to see”. No harm done
Hows everyone doing? I went through the whole thread over the last few days. Very good information here. Appreciate the video on S+R Hog. I did mine in a more flawed cluttering way so was great to see a different view on it.
I’ve actually set up charts on numerous pairs on a demo account looking at the daily/weekly timeframe and have plotted the S+R for the week. As of present I’m an intraday trader but I’m very interested in higher time frame trading as I believe its far less stressful IMO. Does anyone have a tidy weekly pivot indi? Currently putting them in manually. Sorry if this post deviates from the thread, I’ll edit it accordingly if it does.
Thanks
Thank you yunny.
This reversal pattern didn’t work because the size of the pattern compared to the other candles was huge… there was no room left for the bulls… when I see this I’d rather wait for a good retracement or just do nothing
Hi Taste, sorry not to get to this sooner.
It varies according to market conditions, to be honest, but can give you a ballpark. I scan 22 currency pairs. I do a scan across the Daily chart of each of those four evenings a week, plus on a Sunday, which gives me a direction/overall feel for the charts. That takes ten minutes if there is nothing doing on any Pair - some evenings everything’s just consolidating or looking messy and I can see that there is nothing there that interests me. If I see a chart that piques my interest, then I will check the Weekly, then drill down to lower timeframes, most likely the 240 and the Hourly. I will then place orders for any trades I want to take.
That scan has recently moved later, as I like to see the following day’s Daily Pivot painting as that can inform my decision to enter some types of trade. So I scan at around 2345 Monday to Thursday evenings, if I see no setups then I am done by 0010, if I place some trades then I am done by 0030, every time. Each Pair is sub-ten minutes even if I am placing orders, the time (25-45 minutes) goes simply on the fact that I look at so many as I like to find the ones that are trending cleanly. All times are UK local.
Hi Aesthetic, personally speaking I had a great week last week, nice clean trends made for a happy hunting ground, long the Yen Pairs, long EUR/GBP, plus the tail end of the AUD drop. I have not done much this week as things are consolidating etc. so there’s still opportunity but not as obvious as last week.
In terms of your Pivots question, I don’t know which charting package you use, but have you checked with them whether the various indicators, including Pivots, are embedded? I use eSignal, and I just go to ‘formulas’ and it is all there, pre-calculated, including all durations of Pivot that I might want. I just save them to the chart once and they’re there forever more. I’d think most decent charting packages should work them out for you, unless I have just been spoiled by eSignal?
Anyway, might be worth looking into, they must have a helpdesk or something.
ST
Hi ST, Thanks for the advice. I’m currently using MT4 and the indi yunny provided is good enough for me. I’ve looked at eSignal and will probably use it sometime in the future.
Also in regards to your trading routine, I would like to pick your brains a little if I may. Like I mentioned earlier, I’m starting to become fond of HTF trades. You mentioned that you scan through 22 pairs which to me sounds very impressive as I’m sticking to a measly 10 for now lol.
At the moment I’m just looking at S+R, Pivot Points, Fibs and PA for confluence to set an order. Is this a good starting point do you feel?
I understand if you don’t feel the need to answer as many traders don’t openly discuss how they do things.
Many thanks in advance
No problem. I have only ever used eSignal, I stick with it as I like it so much and I don’t want to mess with something that is working well for me. It does cost a bit, though - they bill in USD, but it comes out to just under £100 a month, I think. I feel as though other platforms ought to have embedded Pivots, though, it can’t be too tricky.
I don’t mind you picking my brains at all. I don’t know whether scanning 22 Pairs is impressive or not - when you have been staring at charts for long enough, particularly if the sort of thing you look for has not changed much over the time you have been trading, then the things you want to see tend to leap out at you. I rattle through them pretty quickly, I’m pretty brutal in rejecting a chart, I’m only actively trading a few at a time. I also started out scanning nearly this many, I have only added a handful to my original set, so I guess I was bound to get used to it at some point lol. I have been setting aside time for an evening scan since I started out, so now it is just a way of life.
S+R, Pivot Points, Fibs and PA for confluence to set an order are a good set in my opinion. Really Fibs and Pivots are only forms of S&R anyway, so I find all that works well as a group. I use all of that, plus some EMAs, plus sometimes a little RSI if I want to choose between a number of similar setups - I’ll take the one with the clearest RSI divergence. But basically my whole approach boils down to identifying clear levels, then using PA to look for Entries out of those levels. So everything you list is stuff I look at to do that. The key word in your post for me is ‘confluence’. Personally I want four separate reasons to be in a trade, if I don’t have that then I am not that interested in putting my money behind my analysis. Keeping the risk consistent as a percentage of the account and being mechanical in the execution and as long as the underlying analysis is sound you should be profitable. I miss things sometimes, I analyse my losses more than my winners, I never enter without having looked at the Daily and Weekly charts, and it works for me over time.
I like the higher timeframe stuff, but I have recently really become sold on the idea that once that is working, it is possible to capture elements of that same overall move for some added intraday gravy. But that can come down the track once the higher timeframe, EOD stuff is working consistently.
But my rambling tendencies aside my answer is yes, in my view that is an excellent starting point.
ST
Bearish Engulfing Pattern
Just like the BULLISH engulfing pattern, the BEARISH engulfing pattern is a two candle formation. It too, is deemed to be a MAJOR REVERSAL signal. The BEARISH ENGULFING pattern should come at the TOP OF AN UP MOVE.
The above chart is a Daily chart an contains two Bearish Engulfing patterns. You will notice that the preceding trend on the first pattern was very short, however according to Mr C, it is ok for the preceding trend to be so short, although personally I think your own judgement may be better in this situation when you take the overall move into consideration.
Again I think the term “Reversal” actually means that the direction of the price may CHANGE and not necessarily “reverse”. As you can see from the next chart, the trend prior to the Bearish Engulfing pattern appearing was clearly up, however after the Bearish Engulfing pattern the market moved sideways;
Also, in the chart below, technically speaking there is more than one Bearish Engulfing pattern, however, since none of them appear after a clearly definable down move, NONE OF THEM count as a true Bearish Engulfing pattern, and the price just kept moving sideways.
So what DOES increase the chances of the BEARISH, and the BULLISH, Engulfing patterns working? Well Mr C has 4 points that we will go through now.
------Just to interject here, if you go back to post #330 made by yunny, it deals with precisely the point Mr C has just mentioned. However in the chart in post #330 you will see that the 2nd candle WAS much greater than the first candle, however yunny has explained his thinking on why the move continued down. I think it goes to show that you MUST use your own judgement with ANY candlestick pattern.
Just because you read in a book that something SHOULD happen, it doesn’t mean it WILL.
A fast move makes the market over extended and vulnerable to profit taking.
Point 3 according to Mr C is if there is increased volume on the second candle of the pattern. I think he mainly adds this point as this book was not specifically wrote for Forex, therefore I would need the help of a more experienced trader to discuss if this is pertinent to currency trading.
If the second day of the pattern engulfs more than one previous real body. I would refer you back to post #330 for this point again.
SUMMARY OF ENGULFING PATTERNS
Engulfing patterns are two candle reversal patterns, which are only valid if they appear AFTER a clearly defined up or down move.
The second candle of either pattern should completely engulf (or cover) the whole of the first candle’s body. It need NOT cover the shadows (wicks)
The larger the second candle of either pattern, in comparison to the first candle, could signify an increased chance of the “reversal” pattern working.
MY TAKE ON IT
While I believe it IS necessary to respect the Engulfing patterns when they appear, I think it is also necessary to bear in mind WHERE they have appeared, and also if they have helped to confirm any previous level of support/resistance or swing high/low.
As mentioned right at the start of Mr C’s book, ALL reversal signal are no more or less than a signal that the market direction may CHANGE, and not a guarantee that the market will reverse.
So if an Engulfing pattern appears at a prior support/resistance (or swing high/low) point, on or at a fib level (I know we haven’t spoke about fibs yet) or pivot point (haven’t spoke about them either) or ANY previous reaction point, it may well increase the chances of the pattern working.
Just keep in mind WHERE in the bigger picture the engulfing pattern has formed.
Interestingly enough, since we are talking about it right now, with just over an hour of today’s trading to go (10/10/2012) the Euro/Dollar daily chart is shaping up to close forming a BULLISH Engulfing pattern. It does seem to have confirmed a previous level somewhat so it’ll be good to see what happens from here.
Thanks ST. Very informative reply there. Grateful Will surely fire you some more questions in the future.
Hogster (can I call you that) looking at the bullish engulfing pattern on EU daily. I also noticed its currently a hammer on the weekly. I know its currently near the top of the swing but could go back to test 1.3170 possibly depending on how the week ends! Just my newbie opinion
