Impulse–pullback–continue on EURUSD M5: the two-candle rule I use

[LondonScalper]

I needed a rule that stops me inventing pullbacks on EURUSD.

On M5, after a clear London impulse, I only take the continuation if the pullback prints two consecutive candles that fail to make a new adverse extreme, and the second closes back in the impulse direction. One doji is not permission. A deep wipe through the impulse midpoint cancels the idea for that drive.

Stop sits beyond the pullback extreme; I do not widen it because "EURUSD always comes back". Time stop matters — if continuation has not started within a small handful of bars, I scratch rather than hope. The two-candle rule is deliberately blunt so I cannot decorate it with extra indicators mid-trade.

If news is due inside the hold window, the whole IPC idea is off regardless of candle beauty.

• What is your minimum definition of a valid pullback?
• Candle count, structure, or both?

This is boring on purpose. Boring has been kinder to the account.

[Shadow Trader]

My minimum definition is close to yours, but I added one structure rule because the candle count alone let in some ugly pullbacks. The pullback has to hold above the base of the last M5 candle of the impulse, not just the impulse midpoint.

In practice that means a pullback of about 30 to 45% of the impulse on EURUSD. Deeper than half usually meant the drive was already over for me.

The time stop is where I'd put a number. Mine is three bars after entry. If price hasn't made a new high in the impulse direction by the close of the third bar, I scratch. On M5 that's 15 minutes, which is plenty for a scalp.

The edge case I see is when the two candles are both tiny dojis. They technically meet the rule but tell you very little about who is in control. I now require the second candle to have a body at least half the size of its range.

Do you measure the impulse from the swing low or from the London open price?