TechniTrader Beginner "Engulfing White Candlestick Patterns"

List for Successful Engulfing White Entry Candlesticks


Often beginner Traders learn a few candlestick patterns and rush out to trade, believing this is all they need to be successful trading stocks. They are then often surprised to see the stock retrace and lose money.

Learning to find candlestick patterns that are ideal and will move in a strong run or trend that will provide excellent, consistent Return on Investment for that trade requires more than just the candlestick pattern identification.

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Here is a list of a few requirements for successfully trading Engulfing White candlestick patterns:

1. Where the Candlestick Pattern Forms
Where the candlestick pattern forms is crucial to whether the stock will run up as expected or not. Every entry signal has ideal set ups. Not every time that a particular candlestick pattern forms is the stock going to run up.

2. Indicators
Indicators that reveal who is in control of price and that the energy behind the candle pattern, in this case an Engulfing White is sufficient to move price up for good profits.

3. Risk versus Reward 
This must be calculated. Often when a stock does not run as expected, the reason is that the Risk versus Reward point gains was too low for a good entry.

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4. Support and Resistance
Support and Resistance factor into Risk versus Reward. If Support is far below Engulfing White candlestick patterns, then risk increases and the probability the stock will not gain sufficient points is higher. Resistance that is too close cuts down the number of points possible to gain in a run, and warns that the Engulfing White candle has consumed most of the run gain potential.

5. Market Conditions
Many times traders are accidentally trading against the Bias and Sentiment of the overall Stock Market. This happens often when they are following the major Indexes, rather than Market Condition Analysis which is all inclusive of every stock traded that day.

Below is an example of how Engulfing White candlestick patterns may look like a great entry. See the candlestick that just rises above Resistance, which is indicated by the red line. However even though the next day is a white candle this Engulfing White fails to run, and as can be seen in the following days would cause a small loss for most traders with this entry because of the Resistance in the past.

chart example with engulfing white that fails to run - technitrader

The problem with this entry signal was that the stock started to run up eight days prior to its formation, as indicated by the green arrow. In addition, the Engulfing White having moved slightly above a strong Resistance level is another problem. 

The combination of a run underway, easing just slightly above the high of Resistance, AND consuming point gain potential by the Engulfing White together all indicated this was not a good entry. The gap down was triggered Professional Trader profit taking.

TechniTrader is "The Gold Standard in Stock Market Education." Go to the TechniTrader.com Learning Center and watch a wide variety of webinars, to experience for yourself the excellence of TechniTrader education.

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Summary

It takes more than an Engulfing White candlestick pattern or an indicator crossover to be highly and consistently successful. If you have learned candlestick patterns or indicators that is a great start. There is much more you need to learn in order to trade like a professional, and thus earn the high income of a professional.

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Trade Wisely,

Martha Stokes CMT

TechniTrader technical analysis using a TC2000 chart, courtesy of Worden Bros.

Chartered Market Technician
Instructor & Developer of TechniTrader Stock and Option Courses
TechniTrader DVDS with every course.

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Disclaimer: All statements are the opinions of TechniTrader, its instructors and/or employees, and are not to be construed as anything more than an opinion. TechniTrader is not a broker or an investment advisor; it is strictly an educational service. There is risk in trading financial assets and derivatives. Due diligence is required for any investment. It should not be assumed that the methods or techniques presented cannot result in losses. Examples presented are for educational purposes only.