Understanding The Different Strategies of Pullback Trading
Not as famous as FX trading, but Pullback trading offers a promising income for both new and experienced traders. It is the constant favorite of different kinds of traders since pullbacks make sure that traders align themselves in the market. Additionally, it offers a superior risk-to-reward ratio.
This time, you need to know some strategies that work best for Pullback trading. The strategies which will be tackled below will be explained based on their basic ideas. These strategies of pullback trading are characterized into three categories:
- Moving Averages
- Price Action and Lines
- Other Indicators
Three Strategies For Moving Averages
Moving averages secures high ROI (return-on-investment) for those minimalist traders. This moving average is much easier to understand and definitely serves its purpose to all kinds of traders. A moving average is able to track the trends and even pinpoint the entries.
Strategy #1 – Moving Average and Candlestick
Candlestick used alongside moving average is used as a support (resistance) zone. If you’ve known candlestick, you will understand that its approach is straightforward. There are two ingredients for this – the market forming a candlestick pattern and the market pulling back to moving average.
There are candlestick traders who continuously look for entries and patterns. Using this strategy, you can avoid this problem since it can offer a disciplined approach offered to candlestick patterns trading.
Price Action and Lines
If you are thinking of focusing all your attention on the price action and avoiding indicators, this strategy might be very helpful for you.
Strategy #2 – Pullback Trading Through The Use of Trend Lines and Channels
This strategy will grab your attention if you are into the simplicity of price action. This trading method utilizes a trend line that helps outline the significant trend. After that, you will have to draw a channel that identifies the oversold (overbought) conditions when you entered a position.
Strategy #3- The Trend Line Method of John Hill
Through the use of trend lines, this John Hill strategy has become unique on its own. It mainly incorporates the trend lines’ slope to determine a moment of retracement. For weaker momentum, it appears to have shallow lines while a strong momentum appears as steep lines. As you understand this strategy, you will comprehend that it can only be used for complex pullbacks.
Other Indicators
This time, you will know the different trading indicators that can be used for pullback trading. But remember, when you start to use indicators, you will find it crucial to keep everything as simple as before. Each indicator you use puts a distance between the underlying action and you as a trader. Because of that, you should make sure that you properly analyze the indicator that you are about to use, just like in FX trading.
Strategy #4 – Holy Grail Setup by Linda Raschke
This strategy utilizes the ADX indicator to help locate the most robust trend. After that, it will use a moving strategy that will time each entry.
Strategy #5 – The RSI Hidden Divergence
Typically, an RSI divergence utilizes reversal setups. But with the hidden divergence, a continuous trade is being offered.
