📊 Price Action · Continuation
Two-legged pullback
A pullback in a strong trend often forms two waves down (or up) before continuation. Enter on the third-wave impulse in the trend direction; stop beyond the pullback low/high.
Setup
- Chart: 1-hour or daily candles in an established trend
- Wait for the pullback to form two distinct legs down (in uptrend): impulse down, small bounce, second impulse down that undercuts or matches the first
- The second leg often produces bullish divergence on RSI or MACD
Entry
Long: enter on the first bullish candle after the second leg completes, ideally at a key level (Fib 61.8%, EMA 21, prior structure). Short: mirror in a downtrend.
Exit
Target = 1× the total pullback depth projected upward from entry. Trail on breaks of subsequent pullback pivots.
Stop-loss
Below the second leg's low (long) or above its high (short). If broken, the trend is failing.
When it works
- Strong prior trend with room to extend
- Clean two-leg structure — not choppy or overlapping
- Divergence on RSI/MACD at the second leg's extreme
When it fails
- Three or more legs — usually signals a proper trend reversal, not a continuation
- Second leg extends dramatically deeper than the first — trend is exhausting
- Weak-bodied resumption candle — no real buying/selling interest
General trading rules that apply
Regardless of the specific setup, these apply to every strategy on this site:
- Never risk more than 2% of your account on a single trade
- Place a hard stop-loss before entering — no exceptions
- Journal every trade: setup, reason, outcome, one lesson
- After two consecutive losses, stop for the session
- Backtest and paper-trade for a month before deploying real capital
Every strategy here is part of our in-house catalogue, written and calibrated for Indian markets. Past behavior does not guarantee future results. Charts run against 2-year Nifty data — actual results in your account will vary. Backtest, paper-trade, and size responsibly before risking real capital.