Pullback Reversion

What It Does

Pullback Reversion is a long-only trend-continuation strategy. It looks for short dips inside a larger uptrend and enters when price reclaims the trend.

On each bar close, the strategy checks two conditions:

trend:    close > SMA(slow_period)
bounce:   close_prev <= SMA_prev(fast_period)  AND  close > SMA(fast_period)

If both conditions hold, it enters long at market on that bar’s close and attaches a bracket with a fixed take-profit and stop-loss in points. If either leg of the bracket fills, the position is closed; the strategy then waits for the next setup.

The idea is simple. In an established uptrend, a dip to the fast moving average is often where the larger move resumes. Entering on the reclaim (rather than on the dip itself) waits for the market to show its hand before taking the trade. The slow moving average acts as the trend filter, so the strategy stays out when the larger context is not supportive.

The strategy is long-only by design. Equity indices have a directional drift that makes long-side dip buying a higher-conviction setup than shorting rallies. Running the mirror on the short side exists as an obvious extension but is not part of this version.

Key Characteristics

• Long-only
• Two-MA rule: a fast MA for the pullback/bounce signal and a slow MA as the trend filter
• Entry on a single-bar cross-back-above the fast MA, after the prior bar closed at or below it
• Fixed-points bracket for exits; take-profit and stop-loss are set in instrument points at submission time
• One position at a time; the bracket fully manages the trade

Known Weaknesses

• Chop. When the market oscillates above and below the slow MA without a clear trend, entries trigger but neither legs of the bracket has room, producing a string of small losses
• False bounces. The “cross back above” check looks at one prior bar, so a bar that briefly dips and snaps back can qualify even when the deeper move is still down
• Fixed-points sizing. A 150-point stop on NQ is very different from a 150-point stop on GC or ES; defaults are tuned for NQ and should be re-sized for other instruments
• Long-only. The strategy sits flat in prolonged downtrends and misses the short-side mirror of its own setup

Best In

• Trending equity indices during expansion phases
• Higher timeframes (1H and above), where noise is lower and the slow MA filter reflects real trend
• Instruments and periods where the point-based bracket matches the instrument’s daily range