Here is an example of strategies for Engulfing with Stochastics and LWMA(20), when during the course of a decline, the appearance of the Engulfing pattern filtered by Stochastics at the oversold area.
One could consider buying when the next candle exceeds the high price of the pattern.
Place a protective stop loss at the bottom of the pattern.
You can consider the following actions, bearing in mind that a Take-Profit strategy is heavily dependent on the trading profile of each individual.
- Close 60% of the position when price travels 100% the length of the pattern.
- Close the remaining 20% when price reaches the 200% of the length of the pattern.
- Move the protective stop-loss at the top of the pattern.
- Close 10% of the remaining of the position when price reaches 300% of the length of the pattern.
- Close the remaining 10% of the position at the presence of a reversal candlestick or when price closes below the LWMA(20) or when the price travels 400% of the length of the pattern, whichever happens first.
- Other combinations may be applied