Strategy: Trend + Pullback + Confirmation Candle
Central Idea: Trade in favor of the trend after a pullback to a âgoodâ zone and only enter when a Japanese confirmation candle validates it.
1) Setup
âą Time Frames: H1 or H4 (cleaner learning). Daily if you want less noise.
âą Minimum Indicators:
âą EMA 50 and EMA 200 (trend and dynamic âzoneâ).
âą ATR(14) (to measure the stop).
âą (Optional) RSI(14) for confluence, not for hard signals.
âą Markets: any with good liquidity (majors FX, indices, gold, BTC).
2) Define the Trend
âą Bullish: EMA50 above EMA200 and price mostly closing above EMA50.
âą Bearish: EMA50 below EMA200 and price mostly closing below EMA50.
If there is no clarity (intertwined EMAs), do not trade.
3) Draw Zones
âą Mark recent swing supports/resistances.
âą The EMA50 often acts as a âbandâ of pullback in a healthy trend.
4) Wait for the Pullback
âą In bullish: wait for the price to pull back to the zone (S/R + EMA50).
âą In bearish: the same but towards resistances and EMA50 above.
5) Accepted Candle Patterns (Confirmation)
Use one (maximum two) patterns to avoid over-optimizing:
âą Engulfing (bullish/bearish) â body that âeatsâ the previous one.
âą Hammer / Pin bar (long tail against the pullback trend, close near the extreme)
âą Morning / Evening Star (3 candles, clear reversal).
âą Inside bar with a breakout in the direction of the trend.
Practical rule: the body of the signal candle must be clear and decisive; if it is a weak doji, donât.
Step-by-step arithmetic example:
âą Capital = $1,000
âą Risk = 1% â $10
âą Stop = 20 pips
âą Value per pip for 0.01 lots = $0.10
âą Denominator = 20 Ă 0.10 = 2.00
âą Lots = 10 / 2.00 = 0.05 (5 micro lots)
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