Heiken-DEMA Multi-Timeframe Pullback Strategy
Family: pullback · Regime: trending · Complexity: medium · Asset classes: Forex, Equities, Indices · Timeframes: H1, H4
Thesis
Market trends exhibit fractal behavior where high-timeframe institutional flows (DEMA 200) create persistent direction, but short-term liquidity needs or profit-taking create localized exhaustion (RSI Pullbacks). By entering when a short-term pullback occurs within a multi-timeframe confirmed trend, we capture the resumption of the primary move while utilizing volatility-based (ATR) stops to survive noise.
Components
- Heiken Ashi (Standard MT5) (regime) — Serves as the primary trend filter (regime). Ensures we only trade in the direction of 'smoothed' momentum to avoid minor counter-trend noise.
- Simple Moving Average (SimpleMA) (direction) — Acts as a directional anchor. Trades are only taken in the direction of the medium-term average price.
- Relative Strength Index (with timeframe) (entry) — Identifies mean-reversion opportunities within a trend. We enter when the RSI shows a temporary pullback (oversold in an uptrend).
- Stochastic Oscillator (exit) — Used for exhaustion-based exits. As momentum peaks in the trade direction, the Stochastic crossover signals the optimal profit-taking window before a retracement.
- ATR SL Finder (risk) — Provides a dynamic, volatility-adjusted buffer for stop losses, ensuring the trade has room to breathe relative to current market noise.
- DEMA 200 & ADX Combined HUD (confirmation) — Confirmation layer that ensures the 'big picture' (DEMA 200) and the immediate trend strength (ADX > 20) support the trade.
Known failure conditions
- Hypothesis fails if ADX spends >40% of time below 20 during backtest period (regime too flat).
- Fails if price undergoes 'stair-stepping' volatility where ATR SLs are hit before RSI momentum resets.
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