Engulfing Candle Detection with Prior-Candle Direction Filters

Summary

This indicator identifies bullish or bearish engulfing candles using either candle bodies or full high-low ranges. A configurable lookback checks whether a chosen number of preceding closes moved consecutively in one direction, then requires that sequence before accepting an engulfing signal in the opposite direction. The output distinguishes body-based signals from wick-based signals with different positive and negative histogram values.

The document presents the logic as a reusable detection component for ProRealTime, rather than a complete trading system. It cautions that the filter can help locate some reversal patterns but does not exclude patterns that appear with the trend near its end. No performance tests or trading results are provided, and the indicator does not define entries, exits, position sizing, or risk controls. Signals therefore need additional context and validation before use.

Key ideas

• The indicator can detect engulfing candles by comparing candle bodies or full ranges.
• A configurable sequence of prior closes filters for movement in one direction before a signal.
• Positive and negative histogram values distinguish bullish and bearish signals and the selected detection mode.
• The author presents the indicator as a building block that needs additional filters for trading use.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.