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Daily Trend Pullbackbuy the dip inside a trend that already exists

Evidence: ModerateBeginnerSwing · Continuation

The most-traded idea in the market, and the one most often traded badly. A trend is running; price pauses against it; you join at the pause rather than at the extreme.

What separates a version that works from one that does not is almost never the indicator. It is what counts as the trend and what counts as the pullback ending — both of which have to be written down before the trade, because both are trivially easy to see in hindsight.

Everything on this page is measured in daily bars. A rule that says 'twenty bars' means twenty trading days — about a month — and a stop that survives that has to be wide enough to sit through a normal week.

Category
Swing · Continuation
Timeframe
D1 signal · H4 for the entry trigger if you want one
Suitable pairs
EURUSD · GBPUSD · AUDUSD · USDCAD · XAUUSD
Session
Decided at the daily close. No intraday management.
Indicators / tools
EMA(20) · EMA(50) · ATR(14)

Valid setup

SW-01 · DAILY TREND PULLBACK — VALID SETUP GBPUSD · D1 · the pullback touches the EMA(20) and closes above it, then takes out the previous day's high LONG 1.2577 1.2677 1.2778 1.2879 1.2979 1.3080 1.3181 TP1 = 1.5R, then trail 1R EMA(20) — the pullback target EMA(50) — the trend gate TP1 = 1.5R ENTRY = daily close above the previous day's high STOP = 1.5 × ATR(14) below the pullback low 1 2 3 4 1.3079 1.2932 1.2834 ① EMA(20) above EMA(50), both rising — trend confirmed ② Price pulls into the EMA(20) and CLOSES above it ③ A close below it would have ended the setup ④ First daily close above the prior day's high — enter ⑤ Stop 1.5 × ATR below the pullback low, not under the EMA ⑥ A third off at 1.5R, the rest trails the EMA(20)

Exact rules

Entry

  • Trend: the EMA(20) is above the EMA(50) and both are rising. Both conditions, at the daily close.
  • Pullback: price trades back to or through the EMA(20) but closes above it. A daily close below the EMA(20) ends the setup — it does not become a deeper pullback to wait on.
  • Trigger: the first daily close that is higher than the previous day's high, after the pullback.
  • Enter at that close. Mirror the whole thing for shorts.

Stop loss

  • 1.5 × ATR(14) below the pullback low.
  • Not below the EMA(20) — the average moves, and a stop that moves with it is not a stop, it is a moving target.
  • Risk 0.5%–1%. On a daily chart that stop is a long way away, and the position must be small enough that this is fine.

Take profit / exit

  • TP1 at 1.5R, one third off.
  • The rest trails behind the EMA(20) on a closing basis: out when a daily bar closes below it.
  • No time stop. The whole point of the horizon is that the move gets weeks to happen.

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Trading carries risk and most retail accounts lose money. Nothing on this page is financial advice or a recommendation to trade. The chart is an illustration of the rules on constructed candles — it is not a record of a trade and not a backtest.