Today I want to talk to you about trading pull-back.
You may have come across such a situation when you were waiting for a pullback to enter the market, but the price did not stop and went further.
In the place where I expected the end of the rollback, there was a failure and it did not receive an entry point.
Something went wrong?
The trend is our friend!
The most famous and most important rule.
At the beginning of any market analysis there must be a definition of a trend.
If you want to trade pullbacks correctly, you need to determine the direction of the trend.
If you are trading on the hourly chart, you need to determine the direction of the trend on the daily chart and wait for the right situation on your chart, while trading, of course, with the trend.
There must be a trend in the market to trade a pullback.
The trends are different, of different strengths.
They can be divided into three types:
1. When the price bounces off the 20MA and stays higher, we say that the market is in a STRONG TREND.
2. Price bounces back and holds above the 50MA – OVERALL TREND.
3. Price reaches and rebounds from MA 200 – WEAK TREND.
Knowing these types of trends and being able to understand the movement will help us enter the market at the right point.
The entry points will be the areas around the MA lines.
Here it is worth focusing on the word REGION.
You need to understand that the price can go below or above the MA and only then turn around, be ready for this.
Entry into a strong trend
In a strong trend, the price remains above the 20MA.
At the same time, you need to remember that with a strong trend, pullbacks are not deep.
This means that finding the entry point will not be that easy.
But you can open a position after the breakout of the last high.
Entry into a regular trend
In a normal trend, the price makes deeper pullbacks.
The price is testing the 50MA, while the previous resistance may turn into support.
These are the moments we are looking to enter.
In such zones, we will wait for a price reversal candlestick pattern to enter.
Entry into a weak trend
In a weak trend, the pullbacks are even deeper than in a normal trend.
The price makes a strong pullback, reaching 200MA.
When the price of the zone is reached, we are waiting for confirmation – a candlestick formation.
Closing a position is just as important as opening it.
The main signals for the close will be price movement beyond the MA line.
For example, in a market with a strong trend, the price can go down a little more than 20MA, which is not critical yet, but it makes you be more careful.
It is worth paying attention to the support level, which should not be broken by the price, but if the price still exceeds the level, then the position should be closed.
With a weak trend, it is worth remembering that pullbacks may be deeper and price will go beyond the 50MA.
You must be prepared for this.
Watch for a support level that must not be broken.
With a weak trend, holding a position is the most difficult.
The price will generate strong pullbacks, eventually forcing you to close the trade.
Sometimes the price, having reached the desired zone, does not bounce right away.
Consolidation begins and if you see such a situation, the best entry option would be to break out of the consolidation zone.
You must have a plan for each occasion.
Trading with the trend is the most profitable business.
You need to be able to identify the trend on the highest timeframe and more importantly be able to expect the right situation on your timeframe.
The market cannot be predicted with 100% certainty, so use stops and keep an eye on support and resistance levels.
Traders, if you liked this idea or if you have your own opinion about it, write in the comments. I’ll be happy