How to Trade Pin Bars and Engulfing Candles:
A Practical MT5 Guide

Pin bars and Engulfing candles are the two most traded candlestick patterns in retail forex. Between them they account for the majority of price action setups taken by professional technical traders. Understanding not just what they look like, but why they form and what market conditions make them reliable, is the difference between using them profitably and generating random entries with candle-shaped labels.

Pin Bars: Rejection Signals

A Pin Bar is defined by three geometric rules: the wick must be at least 70% of the total candle range, the body must be no more than 20% of range, and the opposing wick must be no more than 15% of range. What these rules describe is a candle where price moved aggressively in one direction, then completely reversed by close — the wick records where the move went, and the small body records where it ended up.

The market story behind a bullish pin bar (long lower wick): sellers drove price significantly below the open during the session. At some point, buyers entered with enough force to push price back up to near the open level by close. The long lower wick is the evidence of that rejection — sellers tried to take the market lower and failed.

What Makes a Pin Bar High-Quality

The geometric definition is necessary but not sufficient. High-quality pin bars share these additional characteristics:

• Location at a significant level. A pin bar rejecting from a major support or resistance zone, a daily moving average, or a previous swing high/low is a meaningful signal. The same pattern forming in open space with no technical significance is noise.
• Candle size relative to ATR. A pin bar on a candle smaller than 70% of the current ATR has limited momentum behind it. The ATR filter in Price Action Patterns Pro removes these automatically.
• Volume confirmation. The session that produced the pin bar should have above-average volume, indicating genuine market participation in the rejection move.
• Timeframe. Daily and H4 pin bars carry significantly more weight than M15 or M5 formations. Higher timeframes represent more market participants and more informed decisions.

Entering on a Pin Bar

Two common entry methods exist. The first is entering at the open of the next candle after the pin bar closes — this gets you in early but risks entering before the setup is fully confirmed. The second is waiting for a break of the pin bar’s nose (the end of the opposing short wick) — this provides confirmation but at a worse entry price. Stop loss placement sits beyond the tip of the pin bar’s long wick, with enough buffer for spread and volatility.

Engulfing Candles: Momentum Shifts

An Engulfing pattern requires a two-candle sequence where the second candle’s body completely engulfs the first candle’s body by at least 110%. The engulfing ratio requirement is important: a second candle that just barely exceeds the first shows marginal momentum. A second candle that engulfs by 150% or more shows decisive momentum.

The psychological dynamic: the first candle establishes a directional move. The second candle reverses that move and then goes significantly further in the opposite direction. Sellers who entered on the first candle are now underwater. This creates pressure to cover positions, which adds to the momentum of the reversal.

Bullish vs Bearish Engulfing

A Bullish Engulfing forms in a downtrend: a smaller bearish candle followed by a larger bullish candle whose body exceeds the first. It signals that buyers have overwhelmed the selling pressure that produced the prior candle. For the setup to be valid, the pattern should form at the end of a defined downtrend, not in the middle of a sideways range.

A Bearish Engulfing forms in an uptrend with the same logic reversed: a smaller bullish candle followed by a larger bearish candle engulfing it. The most powerful bearish engulfing patterns appear at significant resistance levels where price has failed before.

Using ATR and Volume with Engulfing Patterns

Engulfing patterns are subject to the same quality filters as any candlestick pattern. The engulfing candle should be large relative to recent ATR — a small engulfing pattern on low-volume, low-volatility candles provides a weak signal. Price Action Patterns Pro applies both ATR and volume filters automatically, ensuring only engulfing patterns with genuine momentum behind them are marked.