A pullback dealing can be a difficult task for certain dealers which makes it difficult than it actually is. There are several indicators as well as tools that are found for this particular reason but still the dealers look for the simplest method to recognize pullback in the trend, named as inside bars. Implemented in a correct manner this can easily yield high in Money accuracy.
The Downtrend and Uptrend Pullback
Pullback is a rise in cost during down trend and also a fall in cost during the uptrend. It can be noted as pause or the period of consolidation, before the cost starts to move in same way.
When a new low or high is formed in an opposite direction of this trend it might show reversal of the trend.
Method of Applying The Pullback
The strategy of binary options is designed to be utilized in the trending market. At first, one should identify the direction of trend before searching for two or more than two inside bars, showing a Pullback in current trend. The uptrend can be easily spotted by the higher lows and highs. Downtrend is exactly the opposite with the lower highs and lows saying that market to be bearish.
As shown in the image below, we find that a strong downtrend is created. When the cost had made the Pullback, it developed four inside bars which was followed by the Doji, showing lack of the bullish momentum. You should note that all the five bars that are closed within a body of large bearish candle. It was a powerful indication that downtrends would continue most likely. Inside bars does not get closed within mother candle, but was textbook instance of perfect setup.
For being on safe side, one needs to wait for confirmation bar to shut in the similar direction as trend, indicating that it was a valid bar setup. Always, one should place trade with overall direction of trend without taking the trending trades. The pullback trading is actually one of the simplest ways to execute deals without using indicators.
Example strategy :
Indicator MACD (38, 120, 20) > 0
Indicator 50 EMA > 200 EMA and both sloping up
Indicator Stoch (14, 3, 3) makes a pullback and goes below 50.
Place Stop loss below the swing low or 20-30 pips from your entry point or use trailing stop
Well, this is the trickiest part. Here are the few possibilities to consider.
1. Exit at the predetermined amount of pips.
2. Exit at the standard fib extension measured from the pullback.
3. Exit when Stoch (14, 3, 3) goes below overbought lvl of 76.4
You can download 5M Pullback strategy EA