A trading strategy known as "Pullback on Resistance" using the Bullish Engulfing pattern. Here is a simplified step-by-step explanation:
General Idea:
• The price broke through a resistance level and then returned to test it.
• When pulling back from this level, a Bullish Engulfing pattern appears.
• This is a good opportunity to enter a buy trade.
🟩 When to enter the trade?
1. Wait for the price to return to the previous resistance level (which has now become support).
2. Watch for the formation of a Bullish Engulfing pattern (a green candle engulfing a previous red candle).
3. Enter the trade after the engulfing candle closes and not before.
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🔴 Where to place the Stop Loss?
• Place it below the lowest point (the wick of the candle) where the price was rejected.
• This means that if this level is broken, the pattern has failed, and you should exit the trade.
Summary of Rules:
• Entry: After the Bullish Engulfing pattern closes above resistance.
• ❌ Stop Loss: Below the lower wick of the engulfing candle.
• Take Profit: It can be based on risk-to-reward ratio (for example, 1:2 or 1:3)
