Forex Pullback Trading Strategy

Keeping things simple is the best way to approach forex trading, but a lot of traders ignore this fundamental truth and get their fingers burnt most times.

Pullbacks occur during uptrends and downtrends in the form of temporal reversals from the current trend.

We have designed a forex pullback trading strategy that will help you spot them in time and also profit from such market moves.

Chart Setup

MetaTrader 4 Indicators: StochasticExpansion_v1.1.ex4 (default setting), Support and Resistance.ex4 (Barry), SHI_SilverTrendSig.ex4 (default setting)

Preferred Time Frame(s): 1-Minute, 5-Minute, 15-Minute, 30-Minute, 1-Hour, 4-Hour, 1-Day

Recommended Trading Sessions: Any

Currency Pairs: Any pair

Download

Download the Forex Pullback Trading Strategy

Buy Trade Example

Fig. 1.0

Strategy

Long Entry Rules

Enter a buy if the following indicator or chart pattern gets displayed:

  1. The overall bullish trend started with the line of the StochasticExpansion_v1.1 custom indicator turning steel blue in the oversold region (below -5 level), while the red dot of the SHI_SilverTrendSig.ex4 indicator forms below price bars after bouncing off the blue dots (acting as support) of the Support and Resistance (Barry).
  2. The pullback away from the bullish trend was spotted as illustrated on Fig. 1.0 and if the red dot of the SHI_SilverTrendSig.ex4 custom indicator forms below price bars, while price bounces off the blue dots of the Support and Resistance (Barry) indicator, it is a trigger to buy the pair of interest.

Stop Loss for Buy Entry: Place stop loss below support.

Exit Strategy/Take Profit for Buy Entry

Exit or take profit if the following holds sway:

  1. If a blue dot of the SHI_SilverTrendSig.ex4 custom indicator forms above price bars, while price bounces off the red dotted line of the Support and Resistance (Barry) indicator as depicted on Fig. 1.0, it is an indication to exit or take profit at once.
  2. If the line of the StochasticExpansion_v1.1 custom indicator turns orange red and begins to decline while in the overbought region (above the 5 level), it is a signal to exit or take profit without delay.

Sell Entry Rules

Initiate a sell order if the following rules or conditions takes precedence:

  1. The overall bearish trend was logged when the line of the StochasticExpansion_v1.1 custom indicator turned orange red in the overbought region (above 5 level), while the blue dot of the SHI_SilverTrendSig.ex4 indicator forms above price bars after bouncing off the red dotted line (acting as resistance) of the Support and Resistance (Barry) indicator.
  2. The pullback away from the bearish trend was logged as seen on Fig. 1.1 and if the blue dot of the SHI_SilverTrendSig.ex4 custom indicator forms above price bars, while price bounces off the red dotted line of the Support and Resistance (Barry) indicator, it is a trigger to sell the currency pair of focus.

Stop Loss for Sell Entry: Place stop loss above resistance.

Exit Strategy/Take Profit for Sell Entry

Exit or take profit if the following holds true:

  1. If a red dot of the SHI_SilverTrendSig.ex4 custom indicator forms below price bars, while price bounces off the blue dotted line of the Support and Resistance (Barry) indicator as depicted on Fig. 1.1, it is an indication to exit or take profit at once. Notice that we ignored two other red dots (labelled 1 &2), due to the fact that price wasn’t trading within the oversold region i.e. price was found above the -5 level on the StochasticExpansion_v1.1 indicator when the red dots popped up.
  2. If the line of the StochasticExpansion_v1.1 custom indicator turns steel blue and begins to rise while in the oversold region (below the -5 level), it is a signal to exit or take profit without delay.

Sell Trade Example

Fig. 1.1

Free Download

Download the Forex Pullback Trading Strategy

About The Trading Indicators

The SHI_SilverTrendSig.ex4 is a custom indicator for Metatrader 4, usually deployed in spotting trend.

It appears on chart in the form of a red (bullish trend) and blue (bearish) dot, aligned below and above price bars respectively.

The StochasticExpansion_v1.1 is a modified stochastic indicator and is used to define overbought and oversold regions on the price chart.

The Support and Resistance (Barry) is a technical tool that draws support (blue dotted horizontal line) and resistance (red dotted horizontal line) levels on the activity chart.

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