I have started to trade with price action about a month ago using pin bars, engulfing bars and the 2-bar.
Anyhow I start to question the engulfing bar because I can not see the logic behind it. Why does it has to engulf the previous bar? What does this actually tell us?
I do understand that it´s a good thing if we are looking for, let´s say a bearish sign, that the lower part of the previous bar is engulfed, because this tells us that we have lower lows = bearish. But I do not understand why it´s a good thing to engulf even the high of the previous bar if we are looking for a bearish sign! higher highs = bullish, don´t you agree?
For example in my opinion a big red candle like the one in this picture (see link) must be just as bearish as any bearish engulfing bar!
For the discussion, let´s ignore that the candlestick is not at a support/resistance.
The only reason I see for keep following the rule of the engulfing bar is for the benefit that strict rules is good for our disciplin. Not a bad reason, but if this is the only reason why we keep hunting engulfing bar, let´s atleast be honest about it Would love to hear your thougts about this!
English is not my main language, hope you have forbearance with my grammar.