When encountering a strong engulfing candlestick, there are mainly three ways to enter the market, depending on whether you care more about 'making more' or 'losing less'.
Based on my real trading experience, here are my practical views:
1. Pre-placed order method: Place an order in the middle of the engulfing candlestick's body. This method is like bargaining at a market; the cost is low but you might end up waiting in vain. I tried this last year when trading rebar and did catch a few big rebounds, but there were also three times when the price gapped directly after placing the order, and there was no transaction at all.
2. Closing confirmation method: Wait for the candlestick to finish before entering the market. For example, if the closing price of the engulfing candlestick is 10 yuan, buy at 10.5 yuan when the next one opens. Although it costs an extra 0.5 yuan, it is safer. I used this method in March when trading copper; although I made slightly less profit in the first 10 points, I avoided two false breakouts, which made me feel more secure.
3. Breakout following method: Do not act until the price breaks below the lowest point of the engulfing candlestick. This method is the most conservative and is suitable for those who are afraid of being trapped. It's like fishing; you wait for the bobber to sink before you lift the rod. I tried this in May when trading iron ore; indeed, I was not fooled by false movements, but by the time I confirmed, the market had already moved 3%, and I had to rely on position management to make up for it.
To be honest: If you want to earn a good cost-performance ratio, you have to accept the possibility of missing out; if you want certainty, you have to be willing to give up some profits.
I often use the second method, after all, the safety of the principal is more important than earning a few extra points. But if it's a particularly promising variety, like the recent palm oil market, I will use a combination of the first and third methods: half a position with pre-placed orders and half waiting for a breakout, so I can advance or retreat.
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