Indicator Strategy – Entry On The Rollback

If you open the trading platform and see a growing trend, don’t hurry to conclude a deal right away! By applying several stages of technical quote evaluation, you can find a way to conclude a transaction at a much better price, thus reducing the possibility of losses, at least by 50%!

 

What is quote correction

Asset quote correction is a small “rollback” in prices in the opposite direction of general trend movement. Such corrective rollbacks occur on the quote chart of any stock exchange asset and demonstrate short-term trader mood swings:

Indicator Strategy - Entry On The Rollback

In this way, it’s as though the asset quotes gain strength for the continuation of the main trend. So, if you correctly identify the maximum points of rollback, you can learn how to enter into transactions at such levels where the price is unlikely to return in the near future.

 

An indicator to identify correction

One of the most effective indicators for the recognition of price adjustments is the Bollinger Bands. This technical indicator defines the moving average for a price over a certain period of time, as well as the quote’s maximum deviation from the average. Thus, the Bollinger Bands can show the highest level of price growth or decline, after which the correction returns in the direction of the trend. For this strategy, the Bollinger Bands are applied in the default settings.

An indicator to identify correction

 

An indicator to determine trend direction

In order to identify the trend direction on corrections, we suggest using the MACD indicator. To set this indicator for the trading strategy on rollbacks, change the parameters of the “fast” and “slow” averages as shown in the figure below:

An indicator to determine trend direction

If the MACD lines are above the zero level of the indicator, it means that quotes are moving within the framework of a growing trend. If they are below, it means it’s a falling trend:

An indicator to determine trend direction

 

How to trade on corrections

Transactions on price reductions are concluded upon recognition of the following conditions on the quote chart:

1. The MACD lines are below the zero level, which demonstrates the presence of a declining trend on the asset market.

2. Trading asset quotes touch the upper line of the Bollinger Bands – demonstrating quote correction in the opposite direction of the trend. At the same time, the price reaches the upper boundary of the indicator channel, which shows that the correction has acquired the maximum values.

Once the quote chart shows the conditions described above, conclude a transaction on the reduction in price of the asset:

How to trade on corrections

Transactions on price increases are concluded upon recognition of the following conditions on the quote chart:

1. The MACD lines are above the zero level, which demonstrates the presence of a growing trend on the asset market.

2. Trading asset quotes touch the lower line of the Bollinger Bands – demonstrating quote correction in the opposite direction of the trend. At the same time, the price reaches the lower boundary of the indicator channel, which shows that the correction has acquired the maximum values.

Once the quote chart shows the conditions described above, conclude a transaction on the increase in price of the asset:

How to trade on corrections

As practice shows, the use of this strategy allows the trader to increase their number of profitable trades up to 80%. This means that trading on rollbacks is one of the best ways to increase the size of your trading account!


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