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Strategy Playbooks
Trend · Beginner

20 EMA Trend Pullback

Buy the dip in a trend, not the top of the move.

Backtest this playbook
Origin: Classic trend-following technique
Session
Any liquid session
Timeframes
15m–4h
Markets
NQ / MNQ, ES / MES, Gold, Large-cap stocks
Reward
2R
Illustration20 EMA
100.0105.0110.0Stop 106.3Target 2R 111.1RejectionLong 107.9
The 20 EMA tracks the trend. After a four-bar pullback, one bar wicks to 106.4 through the average and closes at 107.9, above it and above its open. Long at the next open, stop 106.3, 2R target 111.1 — reached five bars later. The 50/200 EMA trend filter is confirmed on the longer chart.

Why it works

In a healthy trend, pullbacks to the 20-period EMA are where trend followers add. The setup requires the 50 and 200 EMAs to confirm the trend and the pullback bar to reject the average — evidence that buyers are defending it.

The rules

01Setup

  • Trend: the 50 EMA is above the 200 EMA and price closes above the 50 EMA.
  • Pullback: a bar trades down to or through the 20 EMA.

02Entry

  • The pullback bar closes above the 20 EMA and above its own open — a rejection.
  • Enter at the next bar’s open.

03Stop

  • Below the lowest low of the last five bars, with a 0.1× ATR buffer.

04Target

  • 2R.

05Management

  • An optional 2× ATR trailing stop once the trade reaches 1R. Test both versions.

06Invalidation

  • A close below the 50 EMA ends the trend premise.

Common mistakes

  • Buying the first touch after a parabolic move — wait for structure
  • Skipping the 200 EMA regime filter
  • Entering on a bearish candle that merely touched the average

Educational material, not financial advice. The illustration is a sketch of the rules, not a historical trade. Results in the backtester are hypothetical and do not guarantee future performance.