What is a Bearish Engulfing pattern and how does it work?:

Bearish candlestick pattern is kind of double candlestick pattern & sign of bearish reversal.

Now next question is how can you recognize it, answer is very simple:

as per above mentioned image of bearish engulfing, first candle should be green. ( bullish close )
Second candle should be red ( bearish close ) & it covers green candle completely . ( consider body only )
The body of first candle (green) should be covered from body of second candle (red).

Try to understand the logic of buyers & sellers behind bearish engulfing pattern :

As first candle is green it clearly shows that buyers are in control.(due to heavy quantity of buyers candle’s closing price is greater than opening price.)
Second red candle has covered the complete body of first green candle, clear meaning of this event is- sellers are in control.
Bearish engulfing tells you the seller has more powerful as compare to buyers.

Do you know you can make good profits using bearish engulfing pattern if you know when to trade & when to sit, You need to learn how to avoid common mistakes when trading the bearish engulfing pattern:

majority of traders look to short once they spot bearish engulfing as they think bearish engulfing is sign of weakness & now market is going to down but this is wrong practice.

Now learn what you should do:

As we know that bearish engulfing shows negative pressure or selling pressure but it doesn’t mean that you should take a sell position immediately.

I mean, you should not take position only behalf of the bearish engulfing. here need to make a perfect combination of other price actions parameters and then decide to sell when your combination tells “YES”

Now probably your next question is “What is combination?”

Let me explain:

You need to analyze “MARKET TREND” first, as if you find bearish engulfing in uptrend and decide to sell, high probability to get losses because during the uptrend bearish engulfing usually a retracement within a trend.

In the above chart you can see the trend is positive & bearish engulfing is not able to generate profit. if you want to make consistent results in the stock market then you need to focus on the market trends first before trading with a candlestick pattern.

Now learn how to trade with bearish engulfing pattern

Whenever you combine this pattern with other parameters of technical analysis / price action you will get good result with it. let see some examples.

Combine bearish engulfing with resistance line / resistance zone & swing high. (location is important)
Combine bearish engulfing with descending trend line.

Now learn how to trade with bearish engulfing pattern

Combine bearish engulfing with resistance line / resistance zone & swing high. ( location is important )

Combine bearish engulfing with descending trend line.

Bottom Line:

What have you learned:

Bearish Engulfing is a reversal pattern that shows you sellers are more powerful than buyers.
Do not trade with bearish engulfing in sideways market.
Do not trade with bearish engulfing if market is in strong up trend.
You can combine bearish engulfing with lower high for better result.
You can combine bearish engulfing with descending trend line.