Day trading can seem daunting to beginners—risky, confusing, and filled with uncertainty. But with the right strategy, you can approach the market with confidence and clarity. One of the simplest and most effective strategies for new traders is the “first pullback setup,” a technique designed to capitalize on momentum stocks while managing risk.
In this post, we’ll break down how the first pullback setup works. Why it’s perfect for beginners, and how you can apply it to your day trading. There is a detailed video at the end of this pattern.
What is the First Pullback Setup?
The first pullback setup is a day trading strategy that focuses on buying momentum stocks after their first pullback to the 9 EMA (Exponential Moving Average). This setup helps you take advantage of short-term price movement with minimal risk.
In this strategy, you look for a stock that has surged in the morning and then pulls back to a key moving average on lower volume. Once the stock holds at the 9 EMA with a green candle, it’s your signal to buy. The best part? You know exactly where to place your stop loss—right below the 9 EMA—limiting your potential loss to a manageable amount.
Why This Setup Works for Beginners
The beauty of the first pullback setup is its simplicity and risk control. As a beginner, you want to get into trades that offer a favorable risk-to-reward ratio, and this strategy does just that. For example, if you risk $20 on a trade, you have the potential to make $100 or more if the stock continues to move in your favor.
By keeping your risk small and your potential rewards larger, you can gradually grow your account over time. This method also helps beginners develop the discipline needed to stick to a system and avoid emotional decision-making.
If you want to learn some simple risk management tips check out this blog.
Why Midcaps Are Ideal for This Strategy
Mid-cap stocks are perfect for this strategy. They offer strong volume, liquidity, and price movement without the extreme volatility of penny stocks. These stocks typically trade millions of shares a day and provide ample opportunity for solid gains while keeping your risk manageable.
Conclusion
The first pullback setup is a great strategy for beginners looking to day trade with confidence and control. By managing your risk and focusing on quality setups, you can build a profitable trading system that grows your account over time.
For more in-depth training and mentorship, consider joining our 60 Day Trading Bootcamp, where we help traders of all levels refine their strategies and achieve consistent success.
Watch the full video here and start implementing the first pullback setup in your trades today!
