Trading on pullbacks

Trading on pullbacks

Trading on pullbacks

We all know the essence of any trend strategy, but trading on pullbacks is one of the counter-trend tactics. Thus, trading using this method is applied against the daily trend. In other words, the essence of this trading method is to buy a currency pair on a corrective movement after a fall within the day. You can also sell a pair after a strong growth.

Most professional traders are convinced that you can't go against the trend. But in the context of high volatility of the currency market, it is not only possible, but also necessary.
Features of trading on pullbacks

Counter-trend trading tactics work according to the natural law of market movement: after a large increase or fall, the price will definitely sooner or later go to a correction or rollback on Forex. Many market participants use these moments for their own good.

It is advisable to ask the following question: how do I make a selection for currency pairs so that the strategy on pullbacks is profitable? First of all, we consider highly volatile pairs from the major group. As an assistant, we use the standard Bollinger bands indicator. Its bands will always make it clear that the market is clearly trending or moving sideways. If the price punctures the upper bar of the indicator, then we will consider sales, and if the lower one – purchases. However, it is important to configure the parameters of the BB for a particular market, as well as to test it on a demo account. For the same reason, you can use Stochastic or RSI indicators.

Important: Forex pullback trading involves short-term trading, mostly all trades are opened and fixed within a day. This should be taken into account when placing stop orders (Take profit and Stop loss). It is more appropriate for Forex traders to consider automatic trading, i.e., using expert advisors. Since the correction points can often be overlooked.

There is another point that can be shown by trading on pullbacks: these are signal Japanese candles indicating entry into the market. Sometimes it turns out that the price crosses the upper or lower border of the Bollinger Bands indicator and continues its movement without any rollback. In such cases, it is important to use an additional indicator. The RSI can handle this task quite well. You can also consider the moment of entering the market after the 2nd or 3rd Japanese candle on the M5 timeframe closes inside the Bollinger bands indicator. This will indicate the start of the correction movement.
How to trade the trend on pullbacks?

Trend trading on price pullbacks consists of following simple recommendations, as well as installing several indicators on the price chart that will help determine overbought/oversold conditions.

Trading on a trend reduces risks than in cases when the participant goes against the trend, within the same trade on pullbacks.

To increase the profitability of trading we are going to enter on pullbacks in the direction of the global trend. So, next we will tell you how to trade the trend on price pullbacks. You need to do the following:

First, select an asset (currency pair).
Switch to the D1 timeframe.
Set the moving average indicator on the price chart.
We look at where the Japanese candle is located (if at the bottom, the trend is descending, at the top, ascending).
Then switch to the M15 timeframe.
We set another standard CCI indicator on the price chart.
As soon as the price enters the overbought zone, we sell. That is, Sell transactions.
As you can see, in the picture above, if all orders were opened, they would close in a plus at the end of the day. The trader would get a decent profit on all orders in total.

The conditions for purchases are exactly the opposite of the conditions for sales.
Trading on pullbacks for binary options

Above, we showed how trading on pullbacks in the Forex framework can bring great profits by trading on the trend. Next, let's look at the rollback strategy for binary options. However, we will say right away that it is intended only for two pairs: GBP/USD and EUR / USD. Working timeframe: M5.
By the way, "trading on pullbacks" includes a number of simple indicators from the MT4 terminal:

Stochastic Oscillator;
MACD;
two EMA indicators.
#KG Support and Resistance.

Let's go into the details of the settings of the above-mentioned indicators.

Stochastic Oscillator has the following settings: (14,3,3), MA (Simple, low/High prices). MACD (38, 120, 20) is applied to the closure (close). EMA (200), apply to close. EMA (50), apply to close. The #KG Support and Resistance indicator indicates the nearest highs and lows.

The most active trading time is from 5 to 15 GMT. That is, from 8: 00 to 20: 00 Moscow time.
Conditions for transactions for purchases under the vehicle "trading on kickbacks"

To be able to enter the market up, the following conditions must be met:

The MACD bars are above zero.
The EMA (50) crossed the EMA (200) from the bottom up.
The Stochastic Oscillator crosses the 50 zone from the bottom up.
The signal candle is below the EMA (50).
At the opening of the next candle, we conclude a deal with an expiration of 30 minutes or 6 candles.
For sales, there are absolutely opposite conditions, which we will also consider.
Terms and conditions for sales transactions under the vehicle "trade on kickbacks"

To consider binary options sales for two assets, the following conditions must be met:

The MACD bars are below zero.
The EMA (50) crossed the EMA (200) from top to bottom.
The Stochastic Oscillator crosses the 50 zone from top to bottom.
The signal candle is above the EMA (50).
At the opening of a new candle, we conclude a deal with an expiration of 30 minutes or 6 candles.

Conclusion

Above, we looked at trading on pullbacks not only for Forex, but also for the binary options market. If you follow the rules of trading systems, trading will be quite profitable. You can improve the efficiency of binary options trading if you analyze the trend on higher timeframes and trade exclusively for the trend.

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