# Trend pullback to a moving average: a strategy to learn and test | DT Academy > In a clear trend, wait for a dip back to the 20 or 21 EMA and trade the bounce. [Strategy Library](https://www.thedtterminal.com/academy/strategies) Trend # Trend pullback to a moving average In a trend, price often pulls back to a rising (or falling) moving average before carrying on. You confirm the trend with the averages in order, wait for the pullback to the faster one, and enter when price starts moving with the trend again. Beginner Trending markets: forex, gold, indices, crypto London and New York for intraday; any for H4 and daily H1, H4, D1 [Use this strategy](https://www.thedtterminal.com/login?signup=true&from=academy&entry=strategy_use&redirect=%2Fjournal%2Facademy%2Fstrategies%2Ftrend_pullback_ma) [Practice it](https://www.thedtterminal.com/login?signup=true&from=academy&entry=strategy_practice&redirect=%2Fjournal%2Facademy%2Fstrategies%2Ftrend_pullback_ma) Example 01 ### Trend pullback to a moving average on a chart XAUUSD · H1 Uptrend pullback, bounce Averages: 20 above 50 above 20020 EMA at touch: 2,379.01Entry: 2,385.62Stop: 2,375.62Sample candles, not market data The averages were in order and rising, price dipped to the faster one and the next candle closed back up. The stop sits under the pullback low. ### The rules Setup The trend is up when price is above the 20 (or 21) EMA, that is above the 50, that is above the 200, and all are rising (mirror it for a downtrend) Wait for price to pull back to the 20 or 21 EMA Entry Either: enter when a candle bounces off the average and closes back in the trend direction Or: skip the first attempt to resume the trend and enter on a stop order above the second one (Al Brooks calls these H1 and H2) Stop Below the pullback low (above the high in a downtrend), or out on a candle close beyond the 21 EMA Target The sources leave targets open: set your own, such as the last swing high or a fixed R Manage Close or trail when a candle closes back through the average ### Common mistakes - Using it in a sideways market. A flat average that price keeps crossing is a range, not a trend. - Ignoring averages bunching up. Averages squeezing together can mean the trend is weakening. - Taking the first touch in a weak trend. The first try to resume often fails; some traders wait for the second. - Too many averages on the chart. More lines add more signals to argue with, not more information. ### When it's off - Skip it when the averages are flat or tangled together and price keeps crossing them - Skip it when the faster average turns against the trend and the 50 fails - Call it off when your trigger fails and price breaks the far side of the signal candle ### Words to know Moving average The average closing price over a set number of candles, drawn as a line; the exponential version (EMA) weights recent candles more than the simple one (SMA). Traders use it as a trend filter or as a moving level for pullbacks. Trend (higher highs and higher lows) An uptrend makes higher highs and higher lows, a downtrend lower highs and lower lows, and a range makes neither. Always name the timeframe; a downtrend on M5 can be a pullback on H4. Swing high and swing low A swing high is a peak with lower highs on both sides; a swing low is a dip with higher lows on both sides. It only counts once the candles to its right have closed. Dynamic support A moving average acting as support under a rising market. Signal candle The candle whose break triggers the entry. H1 and H2 Al Brooks's names for the first and second attempts to resume an uptrend after a pullback. When you make it yours, I'll ask what the rules above leave open. Start with one of these: - Which average and type do you use (20 EMA, 21 EMA, 50 SMA), and why that one? - What exactly makes a market trending for you: the averages in order, their slope, or higher highs and higher lows? - How close counts as a touch, and may a candle close beyond the average? [Ask Edge in DT Terminal](https://www.thedtterminal.com/login?signup=true&from=academy&entry=strategy_question&redirect=%2Fjournal%2Facademy%2Fstrategies%2Ftrend_pullback_ma) ## From DT Academy - [Market structure](https://www.thedtterminal.com/academy/market-structure) - [Multi-timeframe analysis](https://www.thedtterminal.com/academy/multi-timeframe-analysis) ## What testing exists No independent test of this exact rule was found. The sources teach it as a way to join a trend, with averages that lag price. ## Before you trust a backtest - Many professional traders risk under 1% of their account on one trade idea, and the common guideline is 1 to 2%. - The more versions of a rule you try on the same data, the more likely a good backtest is luck. Decide your rules before you test. - Include spread and commission, and practice on dates you have not looked at, before you trust a result. ## Sources - [Moving averages and trend trading (opens in a new tab)](https://www.ig.com/au/ig-academy/charting-essentials/moving-averages-and-trend-trading), IG Academy - [Pullback or pitfall? Let the 21-day EMA be your guide (opens in a new tab)](https://articles.stockcharts.com/article/stock-market-pullback-or-pitfall-21-day-moving-average-guide/), StockCharts (David Keller) - [John Murphy's Law #6: follow that average (opens in a new tab)](https://articles.stockcharts.com/article/stockcharts-insider-john-murphys-law-6-follow-that-average-moving-averages/), StockCharts - [Bar counting H1/H2 (a summary of Al Brooks) (opens in a new tab)](https://www.luxalgo.com/library/concept/bar-counting-h1-h2/), LuxAlgo - [Moving averages for trend-following trading strategies (opens in a new tab)](https://www.oanda.com/us-en/trade-tap-blog/trading-knowledge/identify-trends-with-moving-averages/), OANDA - [Controlling risk (opens in a new tab)](https://www.ig.com/en/ig-academy/money-management/controlling-risk), IG Academy - [Forex risk management (opens in a new tab)](https://www.cmcmarkets.com/en-gb/forex/forex-risk-management), CMC Markets - [Pseudo-mathematics and financial charlatanism (Notices of the AMS, 2014) (opens in a new tab)](https://scholarworks.wmich.edu/math_pubs/40/), Bailey, Borwein, López de Prado and Zhu - [What is backtesting? (opens in a new tab)](https://www.ig.com/uk/trading-strategies/what-is-backtesting-and-how-do-you-backtest-a-trading-strategy--220426), IG DT Academy is education, not financial advice. Nothing here is a recommendation to buy or sell any instrument. Trading carries a high risk of losing money, and past results, examples and backtests do not guarantee future results. [Risk disclosure](https://www.thedtterminal.com/risk-disclosure) --- Risk disclosure: Futures, forex and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing one's financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results. [Read the full risk disclosure](https://www.thedtterminal.com/legal/risk-disclosure). 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