summary: the engulfing candles report finds bullish and bearish engulfing patterns and measures how far price actually runs after them — so you can set realistic targets and stops. here's what it measures, the definitions behind it, its 4 variants, and how to customize it.
what the report measures
an engulfing pattern is two candles where the body of the second candle completely engulfs the body of the first. it's a popular momentum/reversal signal — but not every engulfing candle leads to a real move. this report measures how much follow-through they actually produce on your instrument.
for each engulfing candle, the report assumes an entry at the candle's close and tracks how far price runs in the pattern's direction before the setup is invalidated (price reclaims the open of the engulfing candle). the standard view reports the average and maximum continuation; the subreports slice that by R-multiple, by candle size, and onto the daily timeframe.
key terms
bullish engulfing: the engulfing candle opens at or below the prior candle's close and closes at or above the prior candle's open — a green candle that engulfs the prior red one.
bearish engulfing: the engulfing candle opens at or above the prior candle's close and closes at or below the prior candle's open — a red candle that engulfs the prior green one.
invalidation point: where the setup is considered done. for a bullish engulfing, price breaking back below the open of the engulfing candle; for a bearish engulfing, price breaking back above it.
performance / continuation: measured from the close of the engulfing candle to the highest high (bullish) or lowest low (bearish) reached before invalidation.
timeframe: the candle timeframe the pattern is detected on — 5m, 15m, 30m, or daily (customizable).
the 4 variants — at a glance
variant | what it measures | use this when you want to know |
standard | the average and max continuation after bullish and bearish engulfing candles, plus how many of each formed | "how far does price usually run after an engulfing candle?" |
by daily candle | on the daily timeframe, how often the day after an engulfing day continues in the same direction | "does a daily engulfing candle lead to a follow-through day?" |
by RR | how often setups hit each risk-reward target (0.5R–3R) before the stop | "what take-profit (in R) can I realistically expect to hit?" |
by size | continuation grouped by the body size of the engulfing candle | "do bigger engulfing candles follow through more than small ones?" |
standard
the base view. identifies every bullish and bearish engulfing candle on your chosen timeframe and shows the average and maximum continuation for each — the move from the engulfing candle's close to the peak before invalidation. it also reports the total count of engulfing candles, split bullish vs. bearish.
how to read it: the average continuation is your realistic target; the max shows the best case. compare bullish vs. bearish — one direction often runs further than the other on a given instrument. check the totals too: a large continuation built on a handful of candles isn't reliable.
by daily candle
moves the analysis onto the daily timeframe. it looks at three consecutive daily candles: when day 2 fully engulfs day 1 (day 2's high is higher and its low is lower than day 1's), it records day 2's color and then measures how often day 3 closes in the same direction.
how to read it: a high "day 3 continues" rate means daily engulfing candles tend to lead to follow-through days you can trade in the same direction. a low rate means they more often reverse. (note this variant uses a full high/low engulf, slightly stricter than the body-only definition on the intraday views.)
by RR
the most actionable variant for profit-taking. it assumes you enter at the engulfing candle's close with your stop at the candle's low (bullish) or high (bearish), then measures how often price reaches each risk-reward target — 0.5R, 1R, 1.5R, 2R, 2.5R, 3R — before hitting the stop.
how to read it: the hit rate naturally drops as the R-multiple climbs. find the level where it falls off a cliff and set your target just before it. the levels are cumulative — if a trade reaches 2R, it counts as a hit for 0.5R through 2R. if most setups fail to reach 1.5R, that's a sign to take profits earlier or skip the setup.
by size
the same continuation measure as standard, but grouped by the body size of the engulfing candle (open to close, wicks excluded) — bucketed 0–0.2%, 0.2–0.39%, 0.4–0.59%, 0.6–0.89%, and up.
how to read it: bigger engulfing candles usually signal stronger momentum and longer follow-through. find the size bucket that matches the candle forming in front of you and use its average move to set expectations — and watch the sample size in the larger buckets, which tend to be thin.
customizing the report
timeframe. the candle timeframe the pattern is detected on — 5m, 15m, 30m, or daily. a 5-minute engulfing candle and a 30-minute one are different setups with different follow-through.
measurement. show continuation in percent or dollars (standard and by size).
by RR adds a candle-size filter and weekdays-to-use, so you can isolate the setups you'd actually trade.
how to use it
the report turns a popular-but-vague signal into numbers:
identify the pattern on your timeframe (a green candle engulfing the prior red one for bullish; the reverse for bearish).
set your entry at the close of the engulfing candle.
set your stop below the open of the bullish engulfing candle (or above it for bearish) — the invalidation point.
set your target using the data: the average continuation (standard / by size) or the R-multiple that still hits often enough (by RR).
like all edgeful reports, this shows historical probabilities, not risk-management advice — validate with paper trading before risking capital.