All lessons
Build a trend-pullback hypothesis
A dip inside an uptrend can look like a bargain or the start of a reversal. Your rule must tell those ideas apart.
Turn a vague dip-buying idea into measurable demo rules.
A pullback is a move against the trend you have defined. Start with an objective trend rule, such as two confirmed rising swing highs and lows on the hourly chart. Do not relabel a downtrend as a dip after entry.
Choose the setup area, entry trigger and invalidation separately. For example, require a return to a previously marked zone and then a completed bullish candle. A setup can expire without a trade.
Position size follows the planned loss budget and stop distance, with costs allowed. Set the exit and maximum waiting period before testing. Record every valid signal, because attractive chart examples alone conceal losing trades.
Let’s use numbers · hypothetical example
Hypothetical entry 1.1000, stop 1.0980 and target 1.1040 give 20 pips risk and 40 pips reward before costs. A stop produces about -1R; reaching the target produces about +2R. Both belong in the test.
Keep in mind
A pullback can become a reversal. A nominal 2R target says nothing about how often it is reached.
Your turn
Write five rules and test ten consecutive demo opportunities without changing them mid-sample.
A quick check before we move on
What determines size after choosing cash risk?
- How confident the candle looks
- A desired daily income
- Stop distance, pip value and costs
Check answer
Stop distance, pip value and costs Sizing connects the planned loss to exposure. Confidence and income wishes do not measure possible loss.
Sources and further reading
Content reviewed: 29 October 2026
Educational material with hypothetical examples. Trading can cause substantial losses. A course, pattern, stop order or past result cannot guarantee a profit or limit every loss. Practise in simulation and check current rules and product terms in your jurisdiction.
