The pullback strategy remains one of the core ways in which market enthusiasts trade the financial markets.
It entails entering a market when a trend has been established, and then price starts moving against the trend, as frequently seen in the market.
The simple Forex Pullback strategy is a basic trend following system that is designed to sort out trading opportunities following an active trend thrusts higher or lower.
This generally places traders on the path of buying a currency pair on the dips (support) or selling during price resistance (spikes).
With the help of the MACD indicator, our strategy catches pullbacks during an uptrend and downtrend as shown below.
MetaTrader 4 Indicators: MACD.ex4 (Parameters Modified; Fast EMA=17, Slow EMA=31, MACD SMA=14), SuperTrend.ex4 (Default Parameters), PivotWeekly.ex4 (Inputs Variable Modified; ChangeToFibonacci=true)
Preferred Time Frame(s): 1-Minute, 5-Minute, 15-Minute, 30-Minute, 1-Hour, 4-Hour, 1-Day, 1-Week, 1-Month
Recommended Trading Sessions: Any
Currency Pairs: Any pair
Buy Trade Example: AUD/NZD (Australian Dollar / New Zealand Dollar), H1 Chart
Long Entry Rules
Initiate a buy entry if the following indicator or chart pattern gets put on display:
If during a bullish trend, price is seen to retreat on the PivotWeekly support level and continue on its way upwards as illustrated on Fig. 1.0, it is a signal to buy the selected currency pair.
If the lime SuperTrend custom indicator line stays slightly below the candlesticks as seen on Fig. 1.0, bulls are said to be driving price higher, thus a trigger to go long on the designated forex pair.
If the silver histograms of MACD Metatrader 4 forex indicator stack up above the zero horizontal level as depicted on Fig. 1.0, the overall market sentiment is said to be bullish, thus a buy alert will suffice.
Stop Loss for Buy Entry: Place stop loss below the previous swing low.
Exit Strategy/Take Profit for Buy Entry
Exit or take profit if the following rules or conditions takes precedence:
If the SuperTrend custom indicator line changes to red during the course of a bullish trend (refer to Fig. 1.0), bulls are said to be closing their positions increasingly, thus an alert to exit or take profit forthwith.
If the MACD forex indicator pops up a silver histogram below the zero reference level, bulls power is said to be weaning, thus a trigger to exit or take profit forthwith.
Sell Entry Rules
Enter a sell order if the following holds true:
If while the predominant market trend is bearish, and price is seen to retreat on the PivotWeekly resistance level and continue on its way downwards as depicted on Fig. 1.1, it is a signal to sell the currency pair of interest.
If the red SuperTrend custom indicator line stays fairly above the candlesticks (see Fig. 1.1), bears are said to be driving market sentiments, thus a sell order will do.
If the silver histograms of the MACD indicator stack up below the zero horizontal level as exemplified on Fig. 1.1, the general market sentiment is said to be bearish, as such traders are advised to short sell the currency pair of focus.
Stop Loss for Sell Entry: Place stop loss above the previous swing high.
Exit Strategy/Take Profit for Sell Entry
Exit or take profit if the following takes center stage:
If the SuperTrend custom indicator line reverts to lime during a bearish trend (checkout Fig. 1.1), bears are said to be leaving the market in their droves, thus an exit or take profit stance is duly advised.
If the MACD forex indicator pops up a silver histogram above the zero horizontal level while a bearish position is open, bears power is said to be halting, thus an exit or take profit stance is apt.
Sell Trade Example: AUD/NZD (Australian Dollar / New Zealand Dollar), H1 Chart
About The Forex Technical Indicators Used
The Moving average convergence divergence (MACD) is a trend-following momentum indicator that reveals the connection between two moving averages of price.
The super-trend indicator is a trend following and non-repainting MT4 indicator that is based on the CCI.
The PivotWeekly for MT4 is a technical indicator that indicates weekly support and resistance levels on the price chart.
Start using this forex strategy in just 5 minutes. Click here to get started now.