A Trend-Focused, Pullback-Based System for Consistency
1. Core Philosophy
This strategy is built on one simple truth: The market trends more than it reverses. Instead of predicting tops and bottoms, this strategy is based on three core steps. First, you identify the dominant trend using EMA 200. Secondly, use EMA 20 to capture short-term pullbacks, and lastly enter when price resumes the trend. Doing this gives you better probabilities, cleaner entries, and less emotional trading.
2. The Role of Each EMA
EMA 200 — The Trend Filter
The 200 EMA defines the macro direction:
- Price above → bullish environment
- Price below → bearish environment
Think of it as your “permission line”:
- Only buy above it
- Only sell below it
EMA 20 — The Reaction Zone
The 20 EMA acts as:
- A dynamic support/resistance
- A mean reversion point in trends
Price often pulls back to this level before continuing.
3. Market Conditions (When to Trade)
This strategy works best in:
- Trending markets
- 20 EMA over 200 EMA with no chops around 200 EMA for bullish scenarios
- 20 EMA under 200 EMA with no chops around 200 EMA for bearish scenarios
- Clean structure (higher highs / lower lows)
- Moderate volatility
Example of good conditions for this strategy:
Avoid:
- Sideways/choppy markets
- News spikes
- Tight consolidation ranges
Example of bad conditions for this strategy:
4. Entry Setup (The Core Model)
BUY Setup
Time Frame: 1 hour only
Step 1: Confirm Trend
- Price must be above EMA 200
- 20 EMA must be above 200 EMA
- EMA 200 should be sloping upward
Step 2: Wait for Pullback
- Price pulls back toward EMA 20 (Touching)
- Ideally respects it or dips below
Step 3: Confirmation Candle
Enter when you see:
- Bullish engulfing candlestick (Necessary entry confirmation)
- The engulfing candlestick must close above 20 EMA
- Strong rejection wick (Optional confirmation)
- Hammer candle (Optional confirmation)
Step 4: Entry
- Enter at close of confirmation engulfing candle
Buy Trade Example:
SELL Setup
Time Frame: 1 hour only
Step 1: Confirm Trend
- Price below EMA 200
- 20 EMA must be below 200 EMA
- EMA 200 sloping downward
Step 2: Pullback
- Price retraces to EMA 20 (Touching)
- Ideally respects it or breaks above
Step 3: Confirmation
- Bearish engulfing candlestick (Necessary entry confirmation)
- Rejection wick (Optional Confirmation)
- Shooting star (Optional Confirmation)
Step 4: Entry
- Enter at close of confirmation engulfing candle
Sell Trade Example:
5. Stop Loss Placement (Critical)
You have two strong options:
Option 1 (Aggressive)
- SL below/above the engulfing candle pattern (consisting of 2 candles)
Pros:
- High RR
Cons: - More stop-outs
Option 2 (Recommended)
- SL beyond recent structure swing
- Sometimes the high/low of the engulfing candlestick pattern is the recent structure swing itself. This is the best condition to place Stop Loss with no doubt.
Pros:
- More stable
- Better aligned with market structure
6. Take Profit Strategy
Fixed RR Model
- Target 1.5R to 2R
- Set and forget
Simple and consistent.
Structure-Based TP
- Previous high/low
- Liquidity zones
- This is more risky when price is about to hit the structure level but turns out to grab the Stop Loss instead.
Hybrid (Best Approach)
- Partial close (Like 50% of position) at 1 or 1.5R
- Move the Stop Loss to Break Even level; the trade is now risk-free.
- Let rest run to structure
7. Trade Management
Once in a trade:
- Do nothing early
- Avoid moving SL too soon
- Set and forget if you choose the fixed RR model
- Let trade develop
After 1R:
- Option to move SL to breakeven
But don’t over-manage.
8. Entry Quality (This Is the Edge)
Not all pullbacks are equal.
High-Quality Setup
- Strong trend momentum
- Clean pullback (not messy)
- Clear rejection from EMA 20
Low-Quality Setup
- Deep pullback near EMA 200
- Choppy candles
- No clear rejection
Only take A+ setups
9. Confluence for High Probability of Winning
To increase probability, follow below conditions:
- Take trade only after 8AM (London time) and before 8 AM (New York time). This approach takes advantage of the London session’s movement only and avoids the unclear interaction when the New York session starts.
- This strategy may work with any type of assets but I recommend using it with only major Forex pairs like GBPUSD, EURUSD, USDJPY, etc. and Gold.
- Avoid high impact news releases at entry or one hour before news releases, and avoid the day that is going to have very high impact news including Interest Rate Decision, Non-Farm Payroll (NFP), and CPI for all currencies.
- Avoid trading on Mondays.
- You can trade on Fridays but preferably aim for early setups only.
10. Common Mistakes
- Trading against EMA 200: This destroys consistency.
- Entering Without Confirmation: Touching EMA 20 is not enough.
- Overtrading: Not every pullback is a trade.
- Ignoring Market Context: Trend strength matters more than indicators.
11. Example Trade Flow
Bullish Example:
- Price above EMA 200
- Strong uptrend
- Pullback to EMA 20
- Bullish engulfing forms
- Entry at close
- SL below swing
- TP at 2R
See the illustration on the chart:
12. Psychology Behind the Strategy
This system works because it aligns with trend continuation, institutional positioning and liquidity cycles, but the real edge is your Discipline + consistency. This strategy is not about EMA 20 and EMA 200, but it’s about waiting patiently for pullbacks in the right direction. Most traders fail because they chase price, trade randomness or ignore trend
13. Final Rules (Make It Mechanical)
Turn this into strict rules:
- Only trade in direction of EMA 200
- Wait for pullback to EMA 20
- Require confirmation candle (Engulfing candle)
- SL beyond structure
- TP minimum 1.5R
- Max 1–2 trades per day
- Risk 0.5-1% per trade
- Avoid news and choppy markets
Final Insight
This strategy looks simple—and that’s exactly why it works.
Simple systems executed perfectly beat complex systems executed emotionally.
If you combine this with your mindset:
- Clear SL logic
- Strong discipline
- Focus on execution
You can turn this into a consistent, scalable edge.