The forex pullback trading strategy provides a very powerful solution for those who wants to trade low risk to reward breakouts from all types of chart patterns and trend lines. It can be used on all currency pairs and timeframe’s.
The strategy requires 4 easy steps to enter trades:
- Spot any chart patterns or important trend lines on your chart.
- Wait for a price breakout.
- Then wait for the price to pullback towards the chart pattern or broken trend line.
- Look to enter the trade after the pullback. Use candlestick patterns as trade confirmation >> A reversal candlestick pattern is developing – then confirmed.
For long trades
- Look for bullish candlestick patterns to validate bullish breakouts, then enter long position at market.
- Put stop loss 1 pip behind the pullback low.
- Trade objective: Use risk to reward ratio 1:2
For short trades
- Look for bearish candlestick patterns to validate bearish breakouts, then enter short position at market.
- Put stop loss 1 pip behind the pullback high.
- Trade objective: Use risk to reward ratio 1:2
Check out the following examples for better understanding of the forex pullback strategy.
Example 1: Short trade entry, EUR/USD 5 min chart
Example 2: Long trade entry, EUR/USD hourly chart
