- Strategy
- Buys after a bullish engulfing candle that touches the lower Bollinger Band or makes a swing low, and sells after a bearish engulfing candle at the upper band or a swing high. The stop goes beyond the two-candle pattern.
- Risk model
- 1% of balance per trade (configurable), stop-loss beyond the pattern on every order, one position at a time
What it does
An engulfing pattern is a two-candle reversal: a candle in one direction followed by a larger candle in the other direction whose body covers the first body. Engulfing Reversal EA trades it only at a stretched location, either outside a Bollinger Band or at a recent swing extreme.
How it works
On every new bar the EA checks the last two closed bars (the older one is bar 2, the newer one is bar 1):
- Bullish engulfing: bar 2 closed down, bar 1 closed up, bar 1 opened at or below bar 2's close, closed at or above bar 2's open, and has the larger body.
- Bearish engulfing: the mirror image.
- Band location: for a buy, the low of either bar touched or broke the lower Bollinger Band (20, 2.0); for a sell, the high of either bar touched the upper band.
- Swing location: the lowest low (buy) or highest high (sell) of the last 10 bars belongs to one of the two pattern bars.
- Body filter: bar 1's body must be at least 0.3 × ATR(14).
- Stop-loss: beyond the pattern's extreme plus 0.1 × ATR. Setups with a stop wider than 3 × ATR are skipped.
- Take-profit: 2 × the stop distance.
On forex charts the second candle often opens at the previous close, so "opens at or below the close" is written as an inequality rather than requiring a gap. The candlestick patterns and Bollinger Bands lessons give more background.
How to use it
Choose "Band or swing" for the most signals, or one of the stricter location modes for fewer. H4 and D1 engulfing patterns tend to be cleaner than intraday ones. Combine it with your own view of the larger trend if you supervise the EA, and size positions with the Lot Size Calculator when comparing settings.
Settings
| Input | Default | What it changes |
|---|---|---|
| Location mode | Band or swing | Where the pattern must form |
| Bollinger period / deviation | 20 / 2.0 | Band location |
| Swing lookback | 10 | Swing location |
| Min body (x ATR) | 0.3 | Ignores small patterns |
| Stop buffer / Max stop (x ATR) | 0.1 / 3.0 | Stop placement |
| Reward:risk target | 2.0 | Take-profit, 0 disables it |
| Risk per trade / Fixed lots | 1.0% / 0 | Position sizing |
| Max spread / Trading hours | 30 / 7–20 | Filters |
| Break-even / Trailing | on / off | Stop management |
Limitations
Engulfing candles are common and many are not reversals, especially in strong trends where they mark only a brief pause. The entry comes after a large candle, so the stop beyond the pattern can be wide. The rules ignore context such as higher-timeframe trend or news.
Before you run it live
Backtest each location mode in the Strategy Tester on several symbols, then run your preferred setup on a demo account. Check spreads and the broker's stop level, and keep risk per trade low. Past behavior does not guarantee future results.