10 Pullback Trading Strategies That Will Help You Make Money in 2021.

What is Pullback Trading?

First, pullbacks, also known as retracements, are short-term pauses in the current trend before the resumption of the primary trend.

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Pullback trading is leveraging on those short-term pauses in the trend to enter trades in the direction of the primary trend.

Pullback trading provides high probability set-ups and given that you are trading in the direction of the trade, a win is almost sure.

Where you are wrong, however, your protective Stop Loss comes in handy to save your damn account. Haha.

If you have been long a trader than I have been a writer, I am sure you have your way of trading pullbacks.

Chances are that your way of trading pullbacks is different from the way I trade them, and from the way, some other traders do too.

To say the least, pullbacks are traded in different approaches, all of which resonate differently with different traders.

If your pullback strategy has been making you money, you may find it difficult to ditch it.

If it doesn’t, then you must want to learn a new thing or two online to up your game.

In either case, understand that the markets are not rigid and static.

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They change every other time, year in, year out.

Now, what you can just smell is a New Year looming and this means that you may need new approaches to your trading.

And if your trading includes pullback strategies, then today’s post is for you.

In this post, I will teach you 10 pullback trading strategies to use in Olymp Trade in 2021.

If you are a trader in Olymp Trade and have been trading pullbacks with little to no success, then you are just staring at a mega launch into a successful pullback trading in 2021.

Here is the much-awaited list of 2021 pullback trading strategies for Olymp Trade:

  1. Moving Average with Candlestick Strategy.

This Pullback trading strategy is very simple.

All you need to do is to apply a Moving Average of your choice chart.

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The Moving Average you apply, however, should prove to be a moving support or resistance from past observations.

MA 20 has been proven to work perfectly for this purpose.

Have you applied the moving average?

If yes, then the next thing is to change your price chart type from any other form to the Japanese candlestick chart type.

Having done so, just sit back and watch how the price in form of candlesticks behaves in respect to the Moving Average.

Note that a market on an uptrend will trade above the moving average while that on a downtrend will trade below the moving average.

A market trending upwards will then tend to retrace downwards towards the moving average.

On the contrary, a market trending downwards will tend to retrace upwards towards the moving average.

This strategy involves waiting for the price to retrace to the moving average, then forming suggestive candlestick patterns at that point it touches the moving average.

Uptrend: If the market is trending upwards, let it retrace downwards to the moving average, then form bullish candlestick patterns as a trigger for up trade entry.

Downtrend: If the market is trending downwards, however, let it retrace upwards to the moving average, then form bearish candlestick patterns to trigger your down trade entry.

Pullbacks form moving average and candlesticks

  1. Moving Average with Double Pullback Strategy.

This strategy, unlike the first, uses a two-legged pullback as a trigger for entry, without looking for specific candlestick patterns.

The assumption here is that already, the moving average is a support or resistance.

First of all, apply your moving average and any chart type of your choice.

MA 20 and the Japanese candlestick chart are highly recommended here.

The next thing is to wait for a double or a two-legged pullback set up.

A market trending upwards trades above the moving average while that trading downwards below the moving average.

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You then, therefore, expect a W shaped double pullback on an uptrend after the price retraces downwards twice to the moving average.

On a downtrend, however, you expect an M shaped double pullback after the price retraces upwards twice to the moving average.

A W shaped double pullback on an uptrend is a buy signal.

On the other hand, an M shaped double pullback on a downtrend is a sell signal.

It’s that simple.

Moving Average with Double Pullback Strategy.

  1. Dual Moving Average Strategy.

The dual moving average is a strategy that involves the application of a long-period moving average with a short-period moving average.

A weighted moving average is highly recommended for the long-period moving average while an Exponential moving average can do for the short-period.

So what are the purposes of these two moving averages?

The long-period moving average shows the general long-term directional bias.

The short-period one, however, is used as a trigger for entry in the direction of the general trend after pullbacks.

So this is it, if the long-period WMA is pointing upwards and the short-period MA has crossed from below to above it, then the trend is upwards.

If however, the long-period WMA is pointing downwards and the short-period MA has crossed from above to below it, the trend is downwards.

Uptrend:

Allow the price to move upwards and retrace even below the short-term moving average.

A buy entry signal comes up when the price, after retracing below the short-term MA, closes above that short-term MA.

Remember the long-term MA is way below the price and the short term MA.

Downtrend: Allow the price to move downwards and retrace even above the short-term moving average.

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A sell entry signal presents when the price, after retracing above the short-term MA, closes below that short-term MA.

The long-term MA is way up above the price and the short-term MA.

Dual Moving Average Strategy.

  1. EMA 9 with WMA 30 Strategy.

This is a pullback trading strategy that makes use Exponential moving average of period 9 and the Weighted moving average of period 30.

It uses the two moving averages to define the general trend and then define entries after pullbacks.

It is different from the dual moving average strategy in that it is specific in the choice of periods of moving averages and works differently as well.

An uptrend is shown by a crossover of EMA 9 from below to above WMA 30.

A downtrend, however, is predicted by a crossover of EMA 9 from above to below WMA 30.

Entry Distinctions.

Uptrend aggressive entry: The price is trading above EMA 9 which is above WMA 30. An aggressive buy entry is justified where the price retraces downwards to EMA 9 or briefly below it, then shortly after, the trigger candlestick closes above that EMA 9.

Uptrend conservative entry: The price retraces from above EMA 9 to below it, then below WMA 30. A conservative buy entry is justified where the trigger candlestick then closes above WMA 30 shortly after, but below EMA 9. You should proceed with caution because it’s a conservative entry.

Invalid Up trade set-up:

Where the price retraces from above EMA 9 to below it and then below WMA 30, then the trigger candlestick closes below WMA 30, do not trade. The signal is invalid.

Downtrend aggressive entry: The price is trading below EMA 9 which is below WMA 30. An aggressive sell entry is justified where the price retraces upwards to EMA 9 or briefly above it, then shortly after the trigger candlestick closes below that EMA 9.

Downtrend conservative entry: The price retraces from below EMA 9 to above it, then above WMA 30. A conservative sell entry is justified where the trigger candlestick then closes below WMA 30 shortly after, but above EMA 9. You should proceed with caution because it’s a conservative entry.

Invalid Down trade set-up: Where the price retraces from below EMA 9 to above it and then above WMA 30, then the trigger candlestick closes above WMA 30, do not trade. The signal is invalid.

EMA 9 with WMA 30 Strategy.

  1. 50% Fibonacci Retracement.

In this strategy, the 50% retracement level is a major support or resistance level. The price needs to show a marked thrust upwards or downwards, having broken from a tight range and not within any range anymore.

Uptrend:

If the price thrusts upwards, locate the nearest swing low of the price thrust and apply the zero line of your Fibonacci retracement tool.

Locate the nearest swing high of the price thrust also, and apply the 100 level of the Fibonacci retracement tool there.

Ensure the 50% retracement level of the tool is clearly visible.

Wait for the price to retrace downwards to the 50% level and take that as a buy signal after a successful retest of the level.

Downtrend: If the price thrusts downwards, locate the nearest swing high of the price thrust and apply the zero line of your Fibonacci retracement tool.

Locate the nearest swing low of the price thrust also, and apply the 100 level of the Fibonacci retracement tool there.

Ensure the 50% retracement level of the tool is clearly visible. Wait for the price to retrace upwards to the 50% level and take that as a sell signal after a successful retest of the level.

50% Fibonacci Retracement.

  1. Trend Lines with Channels.

This pullback trading strategy is simple.

It makes use of trend lines to define the general trend, then channels to pick entry levels after pullbacks, in form of oversold and overbought levels and eventual breakouts.

Sounds simple, right? Definitely so.

Just locate at least three swing highs and three swing lows.

Join all the swing highs with a single trend line and try to pick as many swing highs as possible.

Then join also the swing lows with another trend line, capturing as many swing lows as possible.

Now, where do the two trend lines point towards?

If the trend line joining the swing lows is steep and points upwards, then the trend is upwards.

The trend line joining swing highs is most probably also steep and pointing upwards. The market is forming higher highs and lows progressively, hence an uptrend.

If however, the trend line joining swing highs is steep and points downwards, then the trend is downwards.

Chances are the trend line joining swing lows is also steep and pointing downwards. The market is forming lower highs and lows progressively, and thus a downtrend.

At this point, delete the trend line joining swing highs and maintain the one joining swing lows if you have established an uptrend.

Similarly, delete the trend line joining swing lows and maintain the one joining swing highs if you have settled on a downtrend.

How to Proceed.

Uptrend: Allow the price to thrust upwards and retrace downwards.

Once you notice a downward retracement, allow it to develop mini swing highs and swing lows, then draw a channel of two lines.

The upper line of the channel joins the mini swing highs of the pullback while the lower joins the mini swing lows.

Take it as a buy signal if the retracement breaks the upper line of the channel upwards and out of the channel.

Trend Lines with Channels.

Downtrend: Allow the price to thrust downwards and retrace upwards.

Once you notice an upward retracement, allow it to develop mini swing highs and swing lows, then draw a channel of two lines.

The upper line of the channel joins the mini swing highs of the pullback while the lower joins the mini swing lows.

Take it as a sell signal if the retracement breaks the lower line of the channel downwards and out of the channel.

  1. John Hill’s Trend Line Strategy.

John Hill’s trend line strategy makes use of trend lines during a retracement to gauge the strength of price momentum and therefore time entry in the direction of the initial trend.

Take note also that this applies to complex and long retracements and not the fast and short-term retracements, so longer timeframes are best for this strategy.

Steep trend lines of a retracement mean that the retracement is still going on as long as the price momentum of the retracement is still strong.

If another trend line is drawn and its slope is found to be declining, then it means the price momentum of the retracement is weakening and therefore the retracement is almost over.

In that case, the initial trend before the retracement is almost resuming.

This is how it works. Establish the general trend of the market using your own methods. You can use price action or moving averages or any other indicators you choose.

How to Proceed.

Downtrend: If you established that the market is in a downtrend, allow the price to rally downwards.

Watch until you see an upward retracement of the price.

The upward retracement will form mini swing highs and swing lows.

Of our interest here are the mini swing lows of the retracement.

Immediately at least two swing lows form, join them with a trend line.

Wait for the next two mini swing lows of the retracement and join them with another trend line.

Continue doing so every other time the next two swing lows form.

If the trend lines you draw keep becoming steeper, it’s not yet time to trade down.

If they keep becoming less steep progressively, then time for a down trade entry after the breakout downwards from the last almost flat trend line.

Uptrend:

If you established that the market is in an uptrend, allow the price to rally upwards.

Watch until you see a downward retracement of the price.

The downward retracement will form mini swing highs and swing lows.

Of our interest here are the mini swing highs of the retracement. Immediately at least two swing highs form, join them with a trend line.

Wait for the next two mini swing highs of the retracement and join them with another trend line.

Continue doing so every other time the next two swing highs form. If the trend lines you draw keep becoming steeper, it’s not yet time to trade up.

If they keep becoming less steep progressively, then time for an up trade entry after the breakout upwards from the last almost flat trend line.

John Hill’s Trend Line Strategy.

  1. Heiken Ashi Strategy.

Heiken Ashi is a price chart type that can also be used as an indicator to catch trends and identify trend reversals and trend pauses or pullbacks.

To understand this better, you must do a thorough Heiken Ashi candlestick analysis.

Well, the Heiken Ashi chart is among the chart types on your trading platform.

Choose it on the chart types section and not indicators.

You can then apply it on your chart and you will notice green and red candlesticks similar to those of the standard Japanese candlestick price chart.

For better understanding, let us see the various Heiken Ashi candlesticks and what they mean:

  • Red Heiken Ashi candlesticks are bearish.
  • Red Heiken Ashi candlesticks without upper wicks are strongly bearish.
  • Green Heiken Ashi candlesticks are bullish.
  • Green Heiken Ashi candlesticks without lower wicks are strongly bullish.
  • Heiken Ashi Candlesticks with significant upper and lower wicks then a small body are neutral. They may point to price reversal or pause.

Pullback Trading Strategies

How to Proceed.

Uptrend: Heiken Ashi candlesticks show an uptrend when they appear as consecutive green candlesticks without lower wicks.

A pullback will be shown when Heiken Ashi candlesticks with long upper and lower wicks and a small body begin to appear along that trend.

Remember you are not sure if these small-bodied Heiken Ashi candlesticks with long upper and lower wicks mean downward trend reversal or a pullback.

Switch fast to the standard Japanese candlestick chart and confirm.

If you find bearish reversal candlesticks or patterns of the regular Japanese candlestick chart, then it’s a reversal.

However, if you do not spot bearish reversal candlesticks on the Japanese candlestick chart, watch out for bullish patterns as the pullback proceeds to enter an up trade.

Downtrend:

Heiken Ashi candlesticks show a downtrend when they appear as consecutive red candlesticks without upper wicks.

A pullback will be shown when Heiken Ashi candlesticks with long upper and lower wicks and a small body begin to appear along that trend.

Remember you are not sure if these small-bodied Heiken Ashi candlesticks with long upper and lower wicks mean upward trend reversal or a pullback.

Switch fast to the standard Japanese candlestick chart and confirm.

If you find bullish reversal candlesticks or patterns of the regular Japanese candlestick chart, then it’s a reversal.

However, if you do not spot bullish reversal candlesticks on the Japanese candlestick chart, watch out for bearish patterns as the pullback proceeds to enter a down trade.

  1. RSI Hidden Divergence Strategy.

Another strategy you can use to trade pullbacks like a god in 2021 is the Relative Strength Index (RSI) hidden divergence strategy.

The RSI presents both classic and hidden divergences.

Regular/Classic Divergence

Classic divergences point towards reversals while hidden divergences of the RSI point towards the continuation of the trend.

Hidden Divergence

A classic RSI divergence occurs when the RSI does not support the current price trend and signals a reversal.

Hidden RSI divergences, however, occur when the current price trend continues despite a conflicting opinion of the RSI.

To trade pullbacks using RSI hidden divergences, first establish the current trend of the market. Use price action or indicators to settle on either an uptrend or a downtrend.

Uptrend:

Allow the price to rally upwards and tend to pause and retrace downwards.

At that moment, observe the RSI and see if its line plot is forming higher swing lows or lower ones.

You will resort to a perfect RSI hidden divergence buy signal if the RSI is forming lower swing lows conflicting with the general upward price trend.

A buy trade is justified at the end of the pullback.

Downtrend: Allow the price to rally downwards and tend to pause and retrace upwards.

At that moment, observe the RSI and see if its line plot is forming higher swing highs or lower ones.

You will resort to a perfect RSI hidden divergence sell signal if the RSI is forming higher swing highs conflicting with the general downward price trend.

A sell trade is justified at the end of the pullback.

Trading the RSI Divergence in Olymp Trade

  1. The Holy Grail (ADX).

The Holy Grail is a pullback trading strategy that involves the use of the Average Directional Index (ADX) to define the general trend.

It then uses a simple moving average of period 20 (SMA 20) to pick entries after pullbacks.

Apply the Average Directional Index (ADX) and SMA 20 on your chart first. You can then begin analyzing the price to begin trading pullbacks using this set-up.

An uptrend is shown by the ADX reading above 30 and SMA 20 pointing upwards with the price trading above it.

A downtrend, on the other hand, is shown if the ADX reads above 30 and SMA points downwards with the price trading below it.

Uptrend:

Make sure the uptrend criteria are met as defined above.

You can then allow the price to rally upwards and retrace downwards to SMA 20. If the price at SMA 20 forms bullish candlesticks or patterns, enter up trades.

Downtrend: Let the downtrend criteria be met as defined above.

Next, allow the price to rally downwards and retrace upwards to SMA 20. If the price at SMA 20 forms bearish candlesticks or patterns, enter down trades.

Pullback Trading Strategies

Wrapping Up on 10 Pullback Trading Strategies to Use in Olymp Trade in 2021.

Your 2021 now finds you with more than enough strategies to ace the markets by trading pullbacks in Olymp Trade. What a year!

You no longer have to spend much of your time in the New Year looking for strategies to trade pullbacks. You have a variety of choices, to pick what works for you and resonates best with you.

Happy Trading and good luck in your pullback trading in the New Year!


*Risk warning:

The information provided does not constitute a recommendation to carry out transactions. When using this information, you are solely responsible for your decisions and assume all risks associated with the financial result of such transactions.
 

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