Strategy: Trend + Pullback + Confirmation Candle

Central Idea: Trade in favor of the trend after a pullback to a “good” zone and only enter when a Japanese confirmation candle validates it.

1) Setup

• Time Frames: H1 or H4 (cleaner learning). Daily if you want less noise.

• Minimum Indicators:

• EMA 50 and EMA 200 (trend and dynamic “zone”).

• ATR(14) (to measure the stop).

• (Optional) RSI(14) for confluence, not for hard signals.

• Markets: any with good liquidity (majors FX, indices, gold, BTC).

2) Define the Trend

• Bullish: EMA50 above EMA200 and price mostly closing above EMA50.

• Bearish: EMA50 below EMA200 and price mostly closing below EMA50.

If there is no clarity (intertwined EMAs), do not trade.

3) Draw Zones

• Mark recent swing supports/resistances.

• The EMA50 often acts as a “band” of pullback in a healthy trend.

4) Wait for the Pullback

• In bullish: wait for the price to pull back to the zone (S/R + EMA50).

• In bearish: the same but towards resistances and EMA50 above.

5) Accepted Candle Patterns (Confirmation)

Use one (maximum two) patterns to avoid over-optimizing:

• Engulfing (bullish/bearish) — body that “eats” the previous one.

• Hammer / Pin bar (long tail against the pullback trend, close near the extreme)

• Morning / Evening Star (3 candles, clear reversal).

• 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, don’t.

Step-by-step arithmetic example:

• Capital = $1,000

• Risk = 1% ⇒ $10

• Stop = 20 pips

• Value per pip for 0.01 lots = $0.10

• Denominator = 20 × 0.10 = 2.00

• Lots = 10 / 2.00 = 0.05 (5 micro lots)

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