Pull Back trading

strategy
1. Trade in the direction of the trade
 1. Trade in the
direction of trade
• The first step to pullback trading is to
identify a trend (that’s relevant to your
timeframe), and then trade in the
direction of it.

For example, if you’re trading the daily

timeframe, then you must have a trend on
the daily timeframe.

• For pullback trading to work, the market

must be trending (which means you can
ignore range market condition).
2: Classify the type of trend

Not all trends are created equal.

Some have shallow pullbacks whereas some have deep pullbacks.
So here are the 3 types of trends every trader must know:

• Strong trend: The price respects the 20MA and remains above it
• Healthy trend: The price respects the 50MA and remains above it
3: Identify your area
of value
• In an uptrend, the area of value refers to
the location on your chart where buying
pressure could step in and push the price
higher.
4: Entry trigger to time your pullback trade

 An entry trigger is a “pattern” that gets you into a trade after all your
conditions are met.
 (In this case, our conditions are 1) trading in the direction of the trend 2)
classifying the type of trend 3) identifying the area of value.)
4.1 Entry in Strong
Trend
• As you know, a strong trending market
has a shallow pullback and remains above
the 20MA (for an uptrend).

• This means buying on a pullback can be

difficult because the pullback is usually
short-lived before the trend resumes
higher.

• So, an easier approach to buy a breakout

of the swing high.
4.2 Entry in Health
Trend
• In a healthy trend, the pullback is healthy
and it could re-test the 50MA or previous
resistance turned support—so these are
areas to look for buying opportunities.

• Next, you can look for a bullish reversal

candlestick pattern (like Hammer, Bullish
Engulfing Pattern, etc.) as an entry
trigger to get long.
4.3 Entry in weak trend
• In a weak trend, the pullback is deep and
it could re-test the 200MA or, support
area.

• Next, you can look for a bullish reversal

candlestick pattern (like Hammer, Bullish
Engulfing Pattern, etc.) as an entry
trigger to get long.
5: Exits to protect your account and
maximize your profits

Now, there are 2 types of exits to consider:

1.Exit when you’re wrong
2.Exit when you’re right
 5.1 Exit when you’re wrong
After you enter a trade, there’s a possibility the
market could move against you.
So, at which point on the chart will you get out of
the losing trade (otherwise known as your stop loss)?
Well, you want to exit the trade when your trading
setup is invalidated.
For example:
In a strong trending market, the area of value is around
the 20MA.
So, if the price breaks below the 20MA, then the area
of value is breached and you should get out of the
trade.
5.2 Exit when you’re right
Now what if the market moves in your favour, how will you
exit your winner?
Strong trend: In this market condition, it’s ideal to ride the trend
because the pullbacks are shallow which makes it easy to hold onto
your winner.
You can trail your stop loss using the 20MA and exit the trade only
when the price closes below it.
Healthy trend: In this market condition, you can capture a swing by
exiting your trade before the swing high.
Or else, you can ride the trend using the 50MA, but bear in mind the
pullbacks are deeper which requires you to withstand more “pain”.
Weak trend: In this market condition, you want to avoid riding a trend
because the pullbacks are deeper and will likely stop you out of your
trade.
Instead, look to capture a swing at resistance or the previous swing
high.