Setups › Pullback to 20-day avg

Pullback to 20-day avg

From Trend traders. In one line: up-trend, price back near its 20-day avg, RSI 40-60.

About the names. The famous names are credit for publicly described ideas. Every test here uses our own simplified, fully coded version of the idea, so the numbers show how our code behaved on past prices, not how the named person trades or traded. No affiliation with, or endorsement by, any named person.

30,740

trades tested

39%

win rate

-0.11R

average result

-0.48%

vs Nifty per trade

What it looks like

The simplest dip-buying rule: a stock in an up-trend drifts back to its 20-day average while its RSI cools to the middle of its range. It is the original rule this project started with.

Why traders use it

In an up-trend, buyers often step in near the 20-day average. Buying there instead of after a breakout gives a better price and a short distance to the stop.

The exact rule we tested

Close above the 50-day average, and the 50-day above the 200-day.
Close no more than 3% above or below the 20-day average.
14-day RSI between 40 and 60: cooled down, but not broken.

Mistakes to avoid

Mixing up a pullback with a breakdown. A pullback on heavy selling volume is a warning, not a gift.
Buying without a trigger. Our test buys only if price then rises above the day's high, which filters out stocks that just keep falling.
It is the most common setup in the test (it shows up very often), which also means it is the least special.

How we tested it

Every day from 05 Nov 2024 to 05 Nov 2026, every main-board NSE stock (price ≥ ₹50, turnover ≥ ₹5 crore a day) that showed this setup was bought the next day above its last high, with a stop 1.5 ATR below and a target 2.5 ATR above, and sold after 10 trading days if neither was hit; 0.1% costs per trade. Traders usually hold this setup 5-10 days.

The maths behind the result

Average winner +1.14R, average loser −0.89R, win rate 39%. Expectancy = 39% × 1.14 − 61% × 0.89 = -0.10R per trade. To break even with this payoff you need to win at least 44% of trades. How expectancy works.

A historical simulation, not live trading and not a recommendation.