Your performance in trading depends largely on the moment you open and close transactions. To discover that moment you can use the help of many technical analysis tools available on the Binomo platform. You also have to learn to read price action. In today’s article, I am going to present the Pullback Candlestick method.
How to trade the Pullback Candlestick on Binomo
Price is constantly fluctuating. Even when it moves in a certain direction, occasionally it retraces and undertakes the previous direction afterwards. We call a Pullback the candle that represents such a correction of the price.
How to recognise the Pullback candlestick? It has a small body and a long wick. The shadow develops in the opposite direction to the existing trend.
This is very important that you recognise the trend first. There are more candles with small bodies and long wicks called pinbars, but they work differently. The Pullback candle can be only identified in the trending markets.
The Pullback candle in the uptrend
When the price is moving upwards, the Pullback candlestick will have a shadow that is pointed downwards. It shows that sellers are not giving up but the buyers’ strength wins and the price continues to rise.
The Pullback candle in the downtrend
When there is a downtrend in the market, you can spot a candle with a small body and a wick pointed upwards. This is the Pullback candlestick, which represents the buyers struggle to pull prices up. Their attempt fails, however, and the price continues its downward movement.
Using the Pullback candle in trading
You now know how to recognise the Pullback candle on the chart. When is the right moment to open a trading position?
When you detect the upwards movement in the market, you will look for the Pullback candlestick that has a small body pointed upwards, and a wick pointed downwards. The next candle should be green as we expect the price will undertake the previous direction. Enter the transaction at the beginning of this candle and keep it open for a full candle length. In the example below, I use a 5-minute AUDCAD chart, so my transactions last 5 minutes.
During the downtrend, the Pullback candle’s body will point downwards and its tail upwards. You open a trading position at the opening of the following candle, which you expect to be red in colour. In our example below, 3 trades were successful and the last was not. It is a 5-minute chart, this time NZDUSD.
Final words
Pullbacks are the candles that show the price correction. They can be characterised by a small body and a long shadow pointed in the opposite direction to the current trend. Once you recognise the Pullback candlestick, you enter a trading position at the beginning of the next candle, which we expect will undertake the previous course.
No method will guarantee 100% efficiency. You can confirm trading signals with additional techniques. Draw support and resistance levels, or attach the SMA30 to the chart.
Open a Binomo demo account for free and practice identifying the Pullbacks without risking your money. Once you find your way to trade them, move to the live Binomo account.
Wish you a great trading performance!