2. Countertrend move

Perhaps this is the hardest part in my strategy. Countertrend moves are very different in size and shape. An early entry is a common mistake. The best trading opportunities come with flags patterns which are short-term patterns that slope against the previous trend and made up from 2 to 12 bars on the trend timeframe. The minimum requirement for a pullback is a full-correction which means that in an uptrend at least one bar has to make a lower high and a lower low.

Also an important rule to qualify pullbacks is that the countertrend move should not violate the 61.8% fibo retracement level of the prior upleg. Pullbacks touching the Keltner Channel usually provide a good setup. The most important rule however is to be able to draw a “meaningful trendline” on the tactics timeframe. Corrective moves often consist two legs therefore the breakout pullback entry technique should prevent from an early entry.

Here is a link to an acticle on forexcycle.com on trading flag patterns.


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