Bearish Engulfing: The Mistake Most Traders Make
A bearish engulfing candle forms when a large red body completely covers the body of the prior green candle after an advance.
What the pattern is
The bearish engulfing appears at the end of an up-move. The first candle closes higher than it opened. The second candle opens inside that range and closes below the prior open, swallowing the entire body of the first candle. The result is a visible shift from buyers to sellers within a single period.
What forms it
Three conditions must line up. First, price must have been rising so that the pattern sits on top of an established advance rather than in sideways or falling price. Second, the red body must fully cover the preceding green body; wicks alone do not count. Third, volume on the engulfing candle should rise compared with the volume on the prior bar, showing that sellers are entering with force.
How it fails
The most common error is treating the pattern as a perfect mirror of its bullish counterpart. Downside price action tends to unfold more quickly, so protective stops placed too tightly are often hit before the move develops. Allowing extra room beneath the pattern’s low gives the setup room to play out without being stopped out by normal volatility.
