This video explains a trading strategy using three indicators and highlights its flaws. The revised strategy includes changes in indicators and entry rules resulting in better performance. A backtesting of the strategy shows significant profits and impressive risk-reward ratios. The video recommends using the Trader Edge app for more accuracy in backtesting and improving trading skills, and provides an affiliate link for its 7-day free trial.

A Comprehensive Guide to a Winning Pullback Strategy for Forex Trading

Introduction

If you’re a forex trader, you already know how important it is to have a winning trading strategy. Without it, you may end up making unnecessary losses and not achieving your trading goals. One such winning strategy is a pullback strategy, which involves looking for entry points after a price has moved out of a trend. In this article, we will guide you through a pullback strategy that has been proven to work and show you the numbers behind it.

The Original Strategy

To start with, we will show you the pullback strategy that was used before making adjustments to it. The strategy included three indicators: the KQE threshold, the Extreme Trend, and ten different MAS, three of which were enabled. The rules for a buy signal included having the Extreme Trend print a blue triangle at the time the indicator receives a signal, having the price action above the MAS, and having the QQE green. The reward ratio was one to two. The main challenge with this strategy was that it failed to eliminate losing trades.

Eliminating Losing Trades

To avoid losing trades, adjustments had to be made to the original strategy. The first adjustment involved getting rid of the QQE and replacing it with the Trend Alert. The buy signal would only be considered when the Trend Alert was colored in green. With this change, three losing trades were eliminated. The second adjustment was to replace the ten in one different MAS with a Ripster EMA cloud. This strategy eliminated even more losing trades.

Entry Rules

After the adjustments were made, the entry rules became clearer. In a buy position, the price action must be moving above the EMA clouds, the clouds must be colored in green and blue, and the price action must pull back into the green cloud. During the pullback, the clouds must not change color. The pullback is considered valid if the price action is closed inside or below the green cloud but does not exceed the second cloud. The Extreme Trend indicator should print a blue triangle at the time it does so. The price action must be closed above the clouds, and the Trend Alerts must be green colored.

For a sell position, the market must be moving below the EMA clouds, the price action should have made a pullback into the purple EMA Cloud, and the EMA clouds must not change color during the pullback. The Candlestick must cross in and close either inside the purple EMA cloud or slightly above it without exceeding the Red Cloud. The Extreme Trend indicator should issue a new cell signal, and at the time the indicator prints a triangle, the price action must be closed below the clouds, and the Trend Alerts must be red colored.

Stop Loss and Take Profit

When opening a buy position, the stop-loss should be set slightly below the recent spring low, and the take profit should be set at two times the risk. As soon as the price action reaches a one-to-one risk reward, the stop loss should be moved to the break even. For a sell position, the stop loss should be placed slightly above the recent swing, and the take profit should stay at two times the risk. When the price action reaches a risk reward of one to one, the stop loss should be moved to the break even.

Backtesting

To find out the numbers behind the strategy, backtesting was done. The initial account size was set at 100, and two percent of the account was risked. The fees were set at 0.5, and the word ratio was 77. The profit that was lost was 689.79, and the profit factor was 4.69. Twelve consecutive wins were recorded against three consecutive losses, and the maximum drawdown was 7.31.

Conclusion

In conclusion, the pullback strategy is a winning strategy that has been proven to work. It is important to stick to the rules outlined above to eliminate losing trades. By doing so, the numbers behind the strategy, as seen in the backtesting results, show that the strategy is legit and can be used to achieve your trading goals. As always, we encourage traders to backtest the strategy on different markets and time frames to maximize its effectiveness.

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