I found this setup in Linda Raschke's work years before I understood why it worked. I just knew it felt different from most things I had read. No lagging signals stacked on top of each other. No indicator soup. One trending market, one pullback, one clean line in the sand. That simplicity is what got me.
Raschke is not some Twitter educator. She is a Market Wizard. Decades of verified professional trading across futures and equities. When she describes a setup, I pay attention.
The setup is called the Holy Grail. The name sounds like hype. The rules are not.
What the Holy Grail Setup Is
The Holy Grail is a trend-continuation trade. You are not trying to pick a top or a bottom. You are waiting for a strong trend to pause, pull back to the 20-period EMA, and then resume. That is the whole idea. Ride the trend. Let the market come to you. Enter when momentum restarts.
The ADX reading is what separates this from a random EMA touch. ADX above 30 means the trend has real strength behind it. You are not trading a choppy drift. You are trading a market that has already committed to a direction.
The Setup Rules, Step by Step
Here is exactly how I run this. No shortcuts.
- Confirm the trend is strong. ADX 14 must be above 30. If it is below 30, you do not have a setup. Full stop. Move on.
- Wait for the first pullback to the 20 EMA. Not the second, not the third. The first pullback after ADX crosses above 30 tends to be the cleanest. Price needs to actually tag or come close to the 20 EMA, not just slow down near it.
- Mark the trigger candle. Find the candle that touched or came within a few ticks of the 20 EMA. That is your reference candle. Mark its high.
- Enter on the break of that high. When price trades above the high of the EMA-touch candle, that is your entry. You can use a buy stop order placed just above that candle's high so you get filled automatically on the break.
- Place your stop under the recent swing low. Not under the entry candle. Under the most recent meaningful swing low before the pullback. That is where the setup is wrong if price gets there.
- Target the prior swing high. In a long setup, the prior swing high is your first target. That is where the move measured to on the last leg up. You can take partial profits there and trail the rest.
- Monitor ADX during the pullback. If ADX drops below 30 before price triggers your entry, the setup is void. Cancel the order. The trend has weakened and you no longer have the condition the setup requires.
Why This Setup Works
Strong trends do not move in straight lines. They thrust, they breathe, they thrust again. When ADX is above 30, institutional money is committed to a direction. The pullback to the 20 EMA is where short-term traders take profits or where countertrend players try their luck. When neither group can hold price down, the original trend reasserts itself. That is the moment you want to be in.
The 20 EMA is not magic. It is a widely watched level. That is what matters. When a lot of participants are watching the same level and price holds there in a strong trend, the reaction can be sharp.
The ADX filter is doing the heavy lifting. It keeps you out of range-bound markets where EMA touches mean nothing. Without it, you would be trading every random bounce off a moving average. With it, you have context.
Where It Fails
I am not going to pretend this setup wins every time. It does not.
The most common failure is entering too late in a move. If ADX has been above 30 for a long time and price has already made several pushes, that first pullback framing is gone. Late-cycle pullbacks hit the EMA and then slice right through it because the trend is exhausted.
The second failure is news. If you are in a pullback and a macro print hits, ADX can collapse fast. The setup void rule (ADX drops below 30 before trigger) protects you here, but only if you are watching.
The third failure is when the pullback is actually a reversal in disguise. Price touches the EMA, looks like a clean setup, triggers your entry, and then keeps going down. The stop placement under the swing low handles this, but it means you have to accept that some setups will stop you out clean. That is not the setup failing. That is the stop doing its job.
Three Filters That Tighten This Up
You can trade this as described and it is a solid framework. But if you want to be more selective, here are three things I look at before taking the trigger.
- Higher timeframe alignment. If the 1-hour chart shows a strong trend and your 15-minute chart is giving you the pullback setup, you have confluence. If the higher timeframe is ranging or counter-trending, the edge thins out.
- Volume on the trigger candle. I want to see above-average volume on the candle that breaks above the trigger high. Quiet breakouts in futures can be fakeouts. Volume participation signals that real buyers are stepping in, not just a thin-market rip.
- Candle structure at the EMA touch. A long wick rejection candle at the 20 EMA (a hammer or bullish engulf) is a better touch than a candle that closes below the EMA on body. Clean rejection tells you the EMA held as support. A close below it means less confidence.
None of these filters are required. They are a way to size up before you commit. Trade the setup without them first in a sim. Then add them one at a time and see what each one does to your results.
What We Found in the Lab
We ran this setup through the WFF Backtest Lab on NQ and ES data going back several years. I am not sharing specific numbers here because numbers without context create bad habits. What I can tell you is this: the setup behaves differently depending on session, trend maturity, and how strict you are about the ADX threshold. The framework Raschke documented holds up. The details of how you apply it determine whether it works for you.
Test your own version. Do not take my word for it and do not take anyone else's word for it either.
Test This in the WFF Backtest Lab
Try this exact question: run the Holy Grail on NQ 15-minute bars, ADX threshold 30, first pullback only, New York session, stop under swing low, target prior swing high. See what the data says before you risk real capital on it.
You can also adjust the ADX threshold, the EMA period, session filters, and volume gates to match your trading style.
Backtest Credits unlock the Qualified tier of the WFF Backtest Lab, giving you full access to systematic strategy testing on professional-grade futures data.
If you want more setups like this one, breakdowns of other tested frameworks, and honest takes on what works and what does not in futures, browse the full WFF blog for more setup guides and indicator breakdowns.
This article is for educational purposes only and does not constitute financial advice or a recommendation to buy or sell any security or futures contract. Past results, whether real or hypothetical, do not guarantee future results. Trading futures involves substantial risk of loss. Most short-term traders lose money. Understand the risks fully before trading with real capital.
This is educational content, not financial advice or a recommendation to trade. Past results do not guarantee future results, and most short term traders lose money. Test your own ideas and manage your risk.