Forex & Stocks Market “PULLBACK” Trading Strategy

Market “PULLBACK” Trading Strategy  – I’m revealing a simple pullback Confluence strategy that will change the way you trade. Pllback refers to a temporary counter-move in the price of an asset within an established trend. It is a short-term reversal against the prevailing direction before the trend resumes. and so why is it so important to understand.

In fact, most trends look like this:

The price goes up, then it pulls back, and then it goes up again. So, if you enter a buy position when the price is going up, there’s a possibility that it might pull back or even reverse the trend.

Instead of taking that risk, it’s safer to wait for a pullback in the trend before entering a position. This way, you are buying into the trend with lower risk involved.

So, based on my research, I have identified 3 important levels where pullbacks tend to reverse. Plus number 4, RSI Pullback confirmation.

• 1. Support and resistance.

pay attention to where the pullback ended. It found support at the previous resistance level, which now acts as a support level. The price then continued its upward movement, experienced another pullback, and where did the pullback ended, the previous resistance now turn support.

This same concept applies to downtrends as well.

• Trendline.

In this chart, we identified a downtrend, so we placed a trend line above it because the price was repeatedly rejected at that level.

Now, pay attention to the price movement. It made a pullback towards the trend line and then moved downward. It pulled back towards the trend line again and continued to go down.

• Moving Average.

Another level where the market may potentially experience a pullback is the moving average.

In this scenario, we identified an uptrend, and we decided to use the 50-period moving average as our key level. It’s important to note that for this specific example, we are using the 50-period moving average because it has shown significant market reaction in the past.

However, markets can also react to other periods such as the 20, 100, or 200-period moving averages. Therefore, it’s crucial to adjust accordingly based on what the market is responding to.

As you can observe, the price made a pullback towards the moving average and then continued to trade higher. It pulled back towards the moving average once again and continued its upward trajectory. This serves as an example of the price pulling back towards the moving average.

• Relative Strength Index.

Another confirmation technique you can utilize is the RSI, or Relative Strength Index indicator. To implement this strategy, you need to adjust the RSI settings. Simply go to the indicator’s settings and change both values to 50. This adjustment will create a single line in the middle of the indicator.

Here’s how the strategy works:

Take a look at this chart with the RSI indicator applied. Observing the left side of the chart, we notice that the price rejected a certain level multiple times, indicating an area of resistance.

Following that, the price broke out of the resistance and underwent a pullback. Now, the key is to determine whether the price will reject this level and resume its upward movement. To do this, wait for the RSI line to cross above the middle line. This crossover will present a favorable opportunity for a long entry.