The bullish engulfing candlestick pattern is one of the most watched bullish candlestick patterns. It takes two candles: a red one, then a larger green one that swallows it. This page explains the shape, how traders confirm it, and how to plan the bullish engulfing stop loss, target and position size.
What a bullish engulfing looks like
- Candle 1: a red (falling) candle, usually modest in size.
- Candle 2: a green (rising) candle whose body opens at or below candle 1's close and closes above candle 1's open, so its body completely covers the first body.
- The wicks do not have to be engulfed; the bodies are what count. The bigger the second body relative to the first, the stronger the pattern is usually read.
Inside the two days: sellers were in charge on day one, and on day two buyers took back all of that loss and more.
What it suggests, and the trend context it needs
The pattern means something only after a downtrend or a pullback in an uptrend. After a long rise, or in the middle of a choppy range, two such candles are common and say little. It suggests a possible turn from falling to rising; it does not confirm one.
How traders confirm it
- The next candle closes above the high of the engulfing candle, or price trades above it; many traders place a buy-stop just above that high.
- Location: a bullish engulfing at support, at a previous low or at a rising moving average carries more weight.
- Volume: heavier volume on the green candle than on the red one suggests genuine buying.
Stop-loss and target
The usual bullish engulfing stop loss goes just below the lowest low of the two candles. If price falls under it, the buyers who reversed the move have been overrun.
The bullish engulfing target is usually the nearest resistance above, or a reward-to-risk multiple such as 2R. Because the engulfing candle is often large, the stop can be wide; check that the target still offers at least about twice the risk before taking the trade.
Sizing the trade
Choose your risk per trade first, then:
Shares = risk amount ÷ (entry − stop)
Example: a ₹3,00,000 account risking 1% has ₹3,000 at risk. Entry is ₹250 and the stop is ₹240, a risk of ₹10 a share. ₹3,000 ÷ ₹10 = 300 shares, a position of ₹75,000. A 2R target would be ₹270. The Position Size Calculator works this out for you.
Common mistakes
- Counting wicks instead of bodies when judging whether the first candle is engulfed.
- Trading the pattern after a long rise, where it is not a reversal at all.
- Buying the close of the big green candle, which often means buying far above a sensible stop.
- Keeping the same number of shares as usual when the stop is wider than usual; size from the stop.
- Moving the stop lower after entry to "give it room".
How often it fails
Frequently. Many bullish engulfing patterns are followed by more falling, especially in a strong downtrend or a weak market. Confirmation and good location help, but they do not make the result predictable, and there are no reliable public statistics that make this pattern a sure thing. Its real value is that it gives a clear place for the stop, so the loss is known before you enter.
Related patterns
- Hammer: a one-candle bullish reversal.
- Bearish engulfing: the mirror image after a rise.
- Doji: indecision that can come before a reversal.
- Double bottom: a larger reversal pattern.
- Also related, coming soon: piercing line, morning star, inside bar and marubozu.
Updated 2026-10-16
Educational content only. It is not investment advice and not a recommendation to buy or sell any security. Prices in examples and illustrations are made up. Patterns and rules fail often; past behaviour guarantees nothing.