What is an engulfing candle?
In one line: An engulfing candle is a candle whose body completely covers the body of the candle before it, and closes in the opposite direction.
What it looks like
Look only at the bodies, the thick part of each Candlestick between the open and the close.
- Bullish engulfing: a small down candle, then a bigger up candle whose body covers it top to bottom.
- Bearish engulfing: a small up candle, then a bigger down candle whose body covers it.
The wicks don't count. Only the bodies.
A simple example
Two daily candles on a stock:
| Day | Open | Close | Body |
|---|---|---|---|
| Monday | $50.00 | $49.20 | Down, $0.80 |
| Tuesday | $49.00 | $50.40 | Up, $1.40 |
Tuesday's body runs from $49.00 to $50.40. Monday's body ran from $50.00 to $49.20. Tuesday's body covers all of it. That's a bullish engulfing candle.
In plain words: Monday sellers won by a little. Tuesday buyers took back all of it, and more.
A note on 24-hour markets
In forex and crypto, each candle usually opens right where the last one closed. So the new body can't start below the old one. Many traders loosen the rule there: the new body just needs to close past the old body's open.
Why it matters
An engulfing candle shows a fast change in who's in control. That's why it's watched as a Reversal sign.
But here's the thing: location matters more than the candle. A bullish engulfing at an old turning point, after a fall, on the side of the bigger trend, is worth noticing. The same candle in the middle of a choppy range means little. Our engulfing pattern guide shows both.
Engulfing vs outside day
An Outside day covers the previous candle's whole range, wick to wick. An engulfing candle only needs to cover the body. Some candles are both. Many are only one.
A common mistake
Trading every engulfing candle you see. On small charts they appear constantly. Without a level and a trend behind them, they're mostly noise. Ask "where is it?" before "what is it?" And set your stop first, often just past the engulfing candle's wick.
Questions
Is a bullish engulfing candle a buy signal?
Not on its own. It shows buyers took control for one candle. It's worth more at a clear support level and in the direction of the bigger trend.
Do the wicks need to be engulfed too?
No. The standard rule only compares bodies. A candle that also covers the wicks is an outside bar as well.
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