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What Is an Engulfing Candle

An engulfing candle is one whose body covers the previous candle's body from end to end in the opposite colour, at the end of a move. This paper shows you a real bullish one drawn from two April days, the rule in both directions, the covering day opened into its hours, a bearish one on the chart, and where the two body colours are set on your platform.

Difficulty
Beginner
Reading time
5 min
Pages
8
Reviewed by
Saman Rahbar

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Two real days

An engulfing candle is a body that covers the body before it, in the opposite colour. The euro against the dollar drew one on 1 and 2 April 2025. The first day was red, a body of 23 pips — a pip being the fourth decimal place. The second opened below where the first had closed and closed above where the first had opened: a green body of 61 pips with the whole of the red one inside it. Sellers had the first day; buyers took all of it back and more inside the second. That is the bullish one. The mirror, a red body covering a green one after a rise, is the bearish one.

The rule, both ways

The rule is about bodies and nothing else. The second candle opens at or past where the first closed, and closes at or past where the first opened, so that the first body fits inside the second from end to end. The wicks — the thin lines above and below the bodies — are ignored. After a fall, green covering red is a bullish engulfing candle; after a rise, red covering green is a bearish one. As with every two-candle shape, the name belongs to the end of a move in the direction being covered.

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