Dynamic Risk Engulfing Pattern Strategy

🚀 Dynamic Risk Engulfing Pattern Strategy

This strategy serves primarily as a comprehensive backtesting tool for the Engulfing Pattern. It is designed to help traders validate the effectiveness of this popular Price Action formation across different assets and market conditions.

📊 Core Logic & Strategy

The script identifies classic Bullish and Bearish Engulfing candles with an emphasis on body-to-body engulfing. To increase the quality of setups, it includes:

• Trend Filter: Uses a built-in EMA to ensure you only take Longs in uptrends and Shorts in downtrends.
  
• Signal Intensity: An optional "Strong Engulfing" filter that requires the engulfing candle's body to be significantly larger (based on a multiplier) than the previous one, filtering out low-momentum signals.
  

🛡️ Risk Management

The strategy offers flexible exit logic to suit different trading styles:

• Dynamic SL/TP: Stop Loss can be set as a fixed percentage or dynamically placed at the signal candle's Low/High with a customizable buffer.
  
• RRR (Risk:Reward Ratio): Easily adjustable Target Profit based on your risk.
  
• Reversal Close: When enabled, the strategy will immediately flip or close a position if an opposite engulfing signal appears, protecting capital against sudden reversals.
  

💡 Recommendations

For the most reliable results, it is highly recommended to test this strategy on higher timeframes (1W, 1D, 4H). On lower timeframes, the Engulfing pattern is often prone to market noise, whereas on higher timeframes, it carries significantly more weight and relevance.

📌 Default Settings: The parameters are currently optimized for BTCUSD on the 1D timeframe (Bitstamp).