# The 7 Rules

![The 7 Banana Strategy Rules — Validation + Filters](/img/indicators/banana/the-7-rules-video-thumbnail.png)

The 7 Banana Strategy Rules — Validation + FiltersWatch Video

The Banana Strategy validates setups with **four validation rules** (mostly automated) and **three filter rules** — two required, one optional (your judgment). See [Banana strategy rules](/indicators/banana/docs/strategy-foundation/banana-strategy-rules.md) for workflow.

Instructor note

Rules **1–4** are objective and carry most of the weight (\~80% of the edge in course materials). Rules **5–7** refine entries for experienced traders. Beginners can focus on 1–4 until the habit is automatic.

## Part 1 — Signal validation (rules 1–4)[​](#part-1--signal-validation-rules-14 "Direct link to Part 1 — Signal validation (rules 1–4)")

![The 4 rules of validating a Banana signal — impulse, pullback, climactic check, impulsive pullback check](/img/indicators/banana/banana-strategy-rules/banana-strategy-four-validation-rules.png)

Rules 1–4 — pattern validation. Mostly automated by the indicator; MT4 Strategy Rules panel aligns with these four.

### Rule 1: Where is the impulse move?[​](#rule-1-where-is-the-impulse-move "Direct link to Rule 1: Where is the impulse move?")

**Look for:** 2–3 **trend candles** that break out of consolidation.

**Impulse wave** here means a short burst of directional candles — not Elliott Wave terminology.

**Two common setups:**

1. **Range breakout** — sideways market, then a sharp 2–3 candle move breaks structure.
2. **Trend continuation** — established trend, small pause, then 2–3 candles resume the move.

| Indicator                          | Your review                                  |
| ---------------------------------- | -------------------------------------------- |
| Detects impulse sequences          | Confirm momentum looks strong vs recent bars |
| Flags breakouts from consolidation | Judge whether the break is clean or messy    |
| Recognises continuation legs       | Fit the move into the bigger trend picture   |

***

### Rule 2: Is there a good pullback?[​](#rule-2-is-there-a-good-pullback "Direct link to Rule 2: Is there a good pullback?")

**Look for:** A **clean retracement** after the impulse — not too deep, not too violent.

**Ideal pullback:**

* **Duration:** 1–3 candles (up to 5 acceptable).
* **Depth:** Near **10 EMA** (dashed) for a single-leg pullback; near **20 EMA** (solid) for a two-leg pullback.
* **Candle size:** Smaller range than the impulse candles.
* **EMAs:** 10 and 20 stay separated and directional.

**Single-leg pullback (preferred):** Price retraces toward the 10 EMA in one clean wave.

**Two-leg pullback (acceptable):** Two distinct waves toward the 20 EMA — still valid if depth stays controlled.

| Indicator                                 | Your review                                        |
| ----------------------------------------- | -------------------------------------------------- |
| Pullback depth checks (e.g. 25–50% rules) | Prefer single-leg when possible                    |
| Candle count via lookback settings        | Ensure pullback bars are smaller than impulse bars |
| EMA separation validation                 | Reject deep, chaotic retracements                  |

***

### The pullback is a flag pattern[​](#the-pullback-is-a-flag-pattern "Direct link to The pullback is a flag pattern")

The pullback in rule 2 is a classic **flag**: impulse (flagpole) → controlled pause (flag) → potential continuation.

```
Impulse (flagpole)  →  Pullback (flag, 1–7 candles)  →  Continuation
```

The Banana Indicator targets **qualified** flags — not every pause counts. Poor flags (too deep, too impulsive) are filtered out in rules 3–4.

***

### Rule 3: Is the impulse move too climactic?[​](#rule-3-is-the-impulse-move-too-climactic "Direct link to Rule 3: Is the impulse move too climactic?")

**Avoid:** The **rubber-band** effect — price stretched too far, too fast, with a large gap to the moving averages.

**Problems with climactic impulses:**

* Overstretched price vs EMAs.
* Elevated reversal risk.
* Poor risk/reward at entry.

**Visual check:**

* Price should sit reasonably near the 10 EMA — not miles above/below.
* EMAs should **follow** price, not lag far behind.
* Reject blow-off legs before a signal.

| Indicator                 | Your review                         |
| ------------------------- | ----------------------------------- |
| ATR / volatility filters  | Eyeball distance from dashed 10 EMA |
| Lookback structure checks | Skip parabolic legs                 |

You want a **controlled** pullback entry — not chasing a vertical spike.

***

### Rule 4: Is the pullback too impulsive?[​](#rule-4-is-the-pullback-too-impulsive "Direct link to Rule 4: Is the pullback too impulsive?")

**Look for:** **Weak** pullback candles — inside bars, dojis, small bodies — not strong counter-trend momentum.

**Red flags:**

* Pullback candles as large as the impulse leg (trend may be failing).
* Price falls back **into** the prior range (breakout failed).
* **10 EMA points against the trade** — down in a bullish setup, up in a bearish setup.

| Indicator                           | Your review                                |
| ----------------------------------- | ------------------------------------------ |
| Minimum pullback depth filters      | Scan bar size and wick behaviour           |
| Directional / EMA alignment filters | Confirm 10 EMA still slopes with the trade |

In an uptrend you want sellers **fading**, not slamming the bid. In a downtrend, buyers should be **giving up**, not aggressively lifting.

***

## Part 2 — Signal filtering (2 rules + 1 optional)[​](#part-2--signal-filtering-2-rules--1-optional "Direct link to Part 2 — Signal filtering (2 rules + 1 optional)")

Rules **5–6** are context filters you apply after 1–4 pass. Rule **7** is **optional** — use when you know market-cycle framing from the course.

![The 2 Banana filter rules plus one optional — pullback count, S/R near entry, optional HTF market cycle](/img/indicators/banana/banana-strategy-rules/banana-strategy-three-filter-rules.png)

Rules 5–6 are required filters (your judgment). Rule 7 is optional HTF market-cycle context.

### Rule 5: First or second pullback?[​](#rule-5-first-or-second-pullback "Direct link to Rule 5: First or second pullback?")

**Goal:** Enter trends **early**, not after exhaustion.

| Pullback # | Typical use                                      |
| ---------- | ------------------------------------------------ |
| **1st**    | Best risk/reward; full size and standard targets |
| **2nd**    | Still solid; normal management                   |
| **3rd**    | Lower odds; tighten targets                      |
| **4th+**   | Usually pass — trend may be tired                |

The dashboard / session stats can help you estimate how many patterns fired today — but **count pullbacks on the chart** yourself.

***

### Rule 6: S/R near entry?[​](#rule-6-sr-near-entry "Direct link to Rule 6: S/R near entry?")

**Goal:** Avoid entries pinned against a ceiling or floor.

**Clear path (good):**

* No major S/R directly in the way of the next leg.
* Prior swing barriers already broken.

**Interference (bad):**

* Range high/low immediately above/below entry.
* Obvious pivot zone from a higher timeframe.
* Recent strong rejection level.

**Swing vs S/R:** Not every minor swing is major S/R. Focus on **range boundaries** from the higher timeframe.

**Examples:**

* **Day trading (H1 / M5):** Confirm H1 is **out of range** before trusting M5 continuations.
* **Scalping (M5 / M1):** Need clear structure on at least one of those frames.

Draw HTF range lines when in doubt.

***

### Rule 7: Higher-timeframe market cycle? (optional)[​](#rule-7-higher-timeframe-market-cycle-optional "Direct link to Rule 7: Higher-timeframe market cycle? (optional)")

**Goal:** Line up lower-timeframe signals with HTF momentum when you use **market cycle** framing from the course.

**If HTF is breaking out / trending:**

* Wait for an LTF **pullback** signal — do not chase vertical HTF legs.

**If HTF is in pullback:**

* Wait for LTF to confirm resumption (e.g. break of pullback extreme) before adding risk.

**Common pairs:**

| Higher TF | Lower TF | Style    |
| --------- | -------- | -------- |
| D1        | H1       | Position |
| H4        | H1       | Swing    |
| H1        | M15      | Day      |
| M5        | M1       | Scalp    |

This raises probability — it is **not** a guarantee. If market cycle is new to you, learn it in the membership course before leaning on rule 7.

***

## Importance hierarchy[​](#importance-hierarchy "Direct link to Importance hierarchy")

| Weight    | Rules | Nature                                                  |
| --------- | ----- | ------------------------------------------------------- |
| **\~80%** | 1–4   | Objective; indicator-assisted                           |
| **\~20%** | 5–7   | Discretionary; 5–6 required when you filter; 7 optional |

Master **1–4** first. Layer **5–6** when your platform, timeframe, and plan are stable. Add **7** when you use market-cycle framing.

## Next steps[​](#next-steps "Direct link to Next steps")

* [Banana strategy rules](/indicators/banana/docs/strategy-foundation/banana-strategy-rules.md) — workflow and dashboard
* [Validate a signal](/indicators/banana/docs/strategy-foundation/signal-validation-flowchart.md) — printable checklist
* [Signal detection](/indicators/banana/docs/features/signal-detection.md) — markers on MT4, MT5, TradingView