How to Trade the Bearish Engulfing Pattern on eToro

🚀 Unleash the power of technical analysis by mastering the Bearish Engulfing Pattern. This widely-recognized candlestick pattern is a game-changer for traders who can successfully identify and capitalize on it. In this article, we’ll reveal the secrets of trading the Bearish Engulfing Pattern on eToro in 2023, making sure you’re well-equipped to turn this pattern into profits.

🐻 What is a Bearish Engulfing Pattern?

A Bearish Engulfing Pattern is a technical analysis tool that signals a potential trend reversal from bullish to bearish. This pattern is formed by two candles: a smaller bullish candle followed by a larger bearish candle, with the latter “engulfing” the former. Traders can use this pattern to identify optimal entry and exit points for short and long positions in various market trends.

😲 Anatomy of a Bearish Engulfing Pattern

To qualify as a Bearish Engulfing Pattern, the bearish candle must have an opening price higher than the closing price of the bullish candle, and a closing price lower than the opening price of the bullish candle. Moreover, the tails of the bearish candle should be longer than those of the bullish candle.

📈 Although this pattern typically appears at the end of a long bullish trend, it can also form within swings or short uptrends.

🛑 Stop Loss and Sell Position Strategies

For short trades, a stop loss can be set at the end of the upper wick of the bearish candle. For long trades, an ideal sell position to avoid losses from a potential trend reversal would be at the closing price level of the bearish candle.

💹 Trading the Bearish Engulfing Pattern on eToro

Spotting a Bearish Engulfing Pattern on eToro is simple if you know where to look. Focus on the peaks of a trend or at the end of a bullish trend. Once you’ve identified a potential pattern, verify that there’s significant buying pressure on the left side before the pattern. Next, confirm that the body of the bearish second candle engulfs the body of the bullish first candle by drawing horizontal trendlines at the ends of the tails or bodies of the second candle.

🔍 Real-World Examples on eToro

Let’s explore some real-world examples of the Bearish Engulfing Pattern on eToro to better understand how this pattern is applied in actual trading situations.

🥇 Example 1: GOLD

In this example with the GOLD asset, we can see three Bearish Engulfing Pattern formations (indicated by red arrows). The first condition – the pattern’s location – is confirmed, along with the bullish trend from its left side. Finally, each second candle in all occurrences has significant dimensions compared to the first candles.

As mentioned earlier, the ideal exit points for short trades would be at the tip of the upper tail, while the ideal exit point for long trades to avoid losses would be at the closing price level of the bearish second candle.

🚀 Example 2: Google (GOOG)

In this case, the Bearish Engulfing Pattern appears on an uptrend for Google (GOOG) – particularly within the swings. The patterns form at the peak of every swing, as shown by the red arrows. Additionally, the left side before the pattern displays strength from buyers.

In this particular example, a trader would have won multiple trades with the Bearish Engulfing Pattern as long as the correct exit or stop-loss points were established. Furthermore, we can see that the pattern is highly effective when trading with swings, tranches, or when compounding.

🌟 Final Thoughts

The Bearish Engulfing Pattern can occur in all types of trends – whether uptrend, downtrend, or sideways. If it’s not visible on a daily range, it can be found within smaller range intervals such as hourly or minute-range. Bearish Engulfing Pattern candles with substantial bodies present a more significant trend reversal than those with smaller bodies or dimensions.

Ultimately, what really distinguishes a pattern as a Bearish Engulfing Pattern is the difference in the body of the first and second candle and the color of the candle. The second candle should be bearish (red) and should completely overwhelm or engulf the first candle.

While trading with the Bearish Engulfing Pattern may seem like a foolproof strategy, it takes practice and experience to profit consistently from trades using this pattern. With an eToro virtual account, you can trade the Bearish Engulfing Pattern in real-time without spending a dime. Simply create your own eToro account and check out the virtual portfolio to trade with virtual funds.

🎉 Good luck and happy trading!

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Author & Expert Trader - Financial Analyst :

My name is Bart Bregman and I am a full-time professional trader with nine years of experience. I specialize in shorter-term trading using technical analysis, and I have extensive experience with Stocks, CFDs, Options, and Crypto trading. I believe that there is no such thing as a bad trade. I'm currently traveling the world as a digital nomad trader. You can follow my journey on Instagram at https://www.instagram.com/bart_bregman/