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Day Trading Technique by Cory Mitchell: Harnessing Engulfing Candle

Day trading technique utilizing the Engulfing Candle pattern is one of the popular strategies, especially for traders seeking opportunities within short time frames. Cory Mitchell, an experienced trader and prominent technical analyst, has developed this strategy to capitalize on the Engulfing Candle pattern in determining market direction and momentum. Below are the steps and examples of applying the day trading technique with Engulfing Candle according to Cory Mitchell:

About Cory Mitchell

Cory Mitchell is a trader and technical analyst who has been active in the trading world since 2005. He holds a Bachelor of Business degree and is also a Chartered Market Technician (CMT) recognized by the Association of Technical Analysts in New York City. Cory Mitchell is well-known for his contributions in various financial media, including Investopedia, DailyFX, and Yahoo! Finance. He also manages the website vantagepointtrading.com, where he shares various trading strategies with traders.

Steps of Day Trading Technique with Engulfing Candle

  1. Engulfing Candle Patterns: There are two types of Engulfing Candle patterns, Bullish Engulfing and Bearish Engulfing. Bullish Engulfing usually occurs at the end of a pullback in an uptrend, while Bearish Engulfing occurs at the end of a pullback in a downtrend.
  2. Time Frame Selection: Use small time frames, such as M15 (15-minute), to search for Engulfing Candle patterns.
  3. Identifying Trending Markets: Look for major currency pairs that are experiencing uptrends or downtrends. You can use tools like Trend Channel to identify trends.
  4. Pullback Identification: When the price experiences a pullback from the main trend, this becomes an opportunity to look for Engulfing Candle patterns.
  5. Entry Rules: Buy entry is executed after the formation of the Bullish Engulfing pattern at the end of a pullback, by waiting for the second candle to pass the high of the first candle. Sell entry is executed after the formation of the Bearish Engulfing pattern at the end of a pullback, by waiting for the second candle to pass the low of the first candle.
  6. Stop Loss and Take Profit Placement: Place stop loss at the low of the second candle for buy entry and at the high of the second candle for sell entry. Take profit can be determined using Fibonacci levels or using risk/reward ratios such as 1:1.6 or 1:2.

Example of Applying Day Trading with Engulfing Candle

Here is an example of applying the day trading technique with Engulfing Candle on the GBP/USD chart with a 15-minute time frame:

  1. Buy Entry Example: During an uptrend, after a pullback, a Bullish Engulfing forms. Buy entry is executed after the second candle of Bullish Engulfing passes the high of the first candle.
  2. Sell Entry Example: During a downtrend, after a pullback, a Bearish Engulfing forms. Sell entry is executed after the second candle of Bearish Engulfing passes the low of the first candle.

Important Tips from Cory Mitchell's Day Trading Technique

  1. Don't Wait Until Engulfing Pattern is Complete: Entry is made when the second candle of Engulfing passes the high/low of the first candle, without waiting for the candle to close.
  2. This Day Trading Technique Aims to Follow Trends: Although the Engulfing pattern is usually used as a trend reversal signal, in this technique, the Engulfing pattern is used to confirm the continuation of the trend.
  3. Engulfing Pattern Doesn't Always Consist of 2 Candles: Sometimes, the Engulfing pattern may involve more than 2 candlesticks before the pattern forms.

By understanding and following Cory Mitchell's steps and tips, you can harness the Engulfing Candle pattern in your day trading technique to identify potential trading opportunities within short time frames.

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