Part one: a qualifying impulse
The leg being joined must have proven itself: displacement that broke structure with participation, per the continuation basics. The impulse's origin, the zone it launched from, and the imbalance it left behind become the model's map: that is where the pullback has an appointment.
Part two: the retrace, graded
Not every dip qualifies. The retrace should come on visibly lesser character than the impulse: smaller bodies, fading participation, overlapping candles, corrective grammar against impulsive grammar. A pullback that displaces as hard as the leg it corrects is not correcting, it may be the character change the CHoCH checklist handles. Depth-wise, the origin zone and the discounted half of the leg are the shopping district.
Parts three and four: trigger and target
At the zone, demand the small confirmation: a rejection with participation, a micro structure shift back in trend direction, the sweep of the pullback's local low resolving upward. Invalidation sits beyond the origin zone, where the leg's logic dies. Targets: the impulse's extreme first, the trend's next external pool beyond, geometry that routinely clears the reward-distance filter, which is precisely why this model, boring as it is, populates most consistent journals.
FAQ
How deep should a healthy pullback go?
Commonly into the leg's discounted half and its origin zone. Full retraces that erase the impulse argue the trend itself is in question.
What invalidates a continuation setup?
Acceptance beyond the impulse's origin: close-through of the zone that launched the leg kills the model's premise cleanly.
Why not just enter at the zone without a trigger?
You can, at the cost of more failures; the micro-trigger trades a slightly worse price for a meaningfully better strike rate. Choose one, per the confirmation trade-off.
ⓘ See these ideas on real price: open the free XAUUSD live chart.