Half retrace entries after the London impulse on EURUSD, no indicators, just the 50 percent line

[Fairman]

Half retrace entries after the London impulse on EURUSD, no indicators, just the 50 percent line

about the cleanest thing I trade. London opens, price makes an impulse move of decent size over maybe twenty to forty minutes, and I draw a simple line from the start to the end of that move on M5. Then I wait for price to pull back toward the middle of it.

I'm not looking for exactly fifty percent. I treat the area from about forty to sixty percent as a zone. When price gets in there and I see a rejection candle, like a wick away from the zone and a close in the direction of the impulse, I take the entry. Stop goes beyond the sixty five or seventy percent area, and if price closes beyond the start of the impulse the idea is dead.

Target is the end of the impulse, with a piece left for an extension. What makes it work for me is the impulse has to be real: strong candles, little overlap, a clean break of earlier structure. If the move was choppy, a half retrace means nothing.

Time wise I trade it between about 08:00 and 10:30 GMT. Later it doesn't line up as often.

[Fairman]

How I draw the line in practice. On TradingView I use the Fibonacci tool but delete every level except 0.4, 0.5 and 0.6, so the chart only shows the zone I care about. The anchor points are the low and high of the impulse, using wicks, not bodies. If I am unsure where the impulse started, it usually means the move was not clean enough in the first place, and I skip it rather than fiddle with anchor points until it looks right.

[Fairman]

The extension piece I mentioned is simple. When price gets back to the end of the impulse, I close most of the trade and leave a small part with the stop moved into profit. If the move continues, I let it run toward the next obvious level from the previous day. If it stalls and drops back, I lose almost nothing on that small part. Most of the time the end of the impulse is where the trade really finishes, so I do not count on the extension at all.

[Fairman]

Something I watch while waiting for the pullback is how price gets there. If it drifts down into the zone with small overlapping candles, that is what I want, because it looks like profit taking. If it falls into the zone with one or two big candles, I am a lot more careful, because that can be the start of a real reversal. In that case I want a clearer rejection and sometimes a second candle confirming before I commit.

[Shadow Trader]

The 40 to 60 percent zone has a hidden minimum size, because the stop distance and the trading costs do not shrink with the impulse. Put numbers on a made up EURUSD move from 1.0850 to 1.0890, 40 pips in about half an hour.

The zone runs from 1.0874 down to 1.0866, with 1.0870 in the middle. A rejection close at 1.0871 with the stop at 1.0861, just past the 70 percent level at 1.0862, risks 10 pips to make 19 back to the high. The chart shows that version.

img_13533_r1.png (64.28 KiB) Viewed 15 times

A 1 pip round trip cost there is a tenth of the risk. Halve the impulse to 20 pips and every distance halves too, so the same entry risks about 5 pips and the cost becomes a fifth.

So a 20 pip impulse can look perfectly clean and still be too small to trade. A minimum impulse size, say four times the smallest stop the method can live with, filters those out before any line gets drawn.

Does the qualifying size change on quiet days for you? A fixed number in pips is simpler, but a share of the average daily range would adapt when volatility drops.

[FXS HongKong Scalper]

How price arrives at the 50 percent line is a good filter. A related check is how long the pullback takes. If the impulse took twenty minutes and the pullback to the half level takes over an hour of drifting, the original move has often lost its interest and the bounce is weaker. A pullback that reaches the zone in a similar or shorter time than the impulse tends to work better. Timing also matters for EURUSD, since a pullback that lands right before a US release is a very different trade from one landing mid morning.