A pullback dealing can be difficult for certain dealers, which makes it difficult than it actually is. Several indicators and tools 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 correctly, this can easily yield high Money accuracy.
The Downtrend and Uptrend Pullback
The pullback is a rise in cost during a downtrend and a fall in cost during the uptrend. It can be noted as a pause or the period of consolidation before the cost starts to move in the same way.
When a new low or high is formed in the opposite direction of this trend, it might show a reversal of the trend.
Method of Applying The Pullback
The strategy of binary options is designed to be utilized in the trending market. First, one should identify the direction of the trend before searching for two or more than two inside bars, showing a Pullback in the current trend. The higher lows and highs can easily spot the uptrend. The downtrend is exactly the opposite, with the lower highs and lows saying that the 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 followed by the Doji, showing a lack of bullish momentum. You should note that all the five bars are closed within the body of a large bearish candle. It was a powerful indication that downtrends would continue most likely. Inside bars do not get closed within mother candle but were a textbook instance of the perfect setup.
One needs to wait for the confirmation bar to shut in a similar direction as the trend for being on the safe side, indicating that it was a valid bar setup. One should always place a trade with the overall direction of the 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 a 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 the overbought level of 76.4
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