A Pullback: Trade Against a Trend
Reading analytical outlooks on the price movements, you might be met with the word “pullback”. Many trading strategies are based on a pullback action. Pullbacks allow you to trade against the trend. Do you think that it’s wrong as the theory teaches you to follow the primary trend? What is a pullback actually? Keep reading to learn about tricky pullbacks.
Pullback: Definition
If you are familiar with a price chart, you know that an asset never goes straight. It moves up and down even within trends. Look at the image below. We have a strong uptrend. Every time the price goes down, it’s a pullback.
A pullback is a short-term price movement against the primary trend.
You should already be able to catch the pullback meaning from the explanation above. Simply stated, a pullback is a movement against the primary trend for a short period of time.
Triggers of Pullbacks
We can say that a pullback is a pause of the primary trend. It means that bulls in a downtrend and bears in an uptrend take control over the price for a while. There can be several reasons why the price changes its direction. To predict a pullback, you should learn about fundamental analysis.
Pullbacks occur due to a change in market sentiment.
- Speaking of Forex, there can be news that signals a weakness of the base currency. Economic events mentioned in a calendar also affect the strength of currencies.
- If you trade metals, you should pay attention to the news. The overall market sentiment has an impact on their price.
- Choosing oil, you should follow the news that defines the market sentiment as oil is a risky asset. Also, crude oil inventories data influences the commodity’s value.
- If you are experienced enough, you can try pullback stock trading. Earnings reports, internal company’s events and industry news affect the price movement.
Pullbacks: Real Examples
To predict pullbacks, you should know how to analyze price movements. Let’s consider a real example of a pullback. Pullbacks occur not only on currency charts, but on the chart of any financial asset. Consider an example of a pullback stock trading. It’s a four-hour chart of Apple stocks. As you can see a pullback may also happen in the downtrend. Moreover, during a pullback candlesticks can break above resistance or below support, but later return.
Pullbacks: Benefits and Drawbacks
A pullback is a complicated pattern that has more disadvantages, especially for a beginner trader.
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Benefits |
Drawbacks |
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Better conditions. A pullback allows traders to buy at a lower price in an uptrend and sell at a higher price during a downtrend. Imagine you couldn’t catch the beginning of the uptrend but still would like to enter the market. The price moves up in the upward trend; thus, every time the peak is formed, your chances to buy at an appropriate price reduces. However, when a pullback happens, you get an opportunity to get a lower price. |
Pullback or reversal? It’s not easy to determine whether it’s a pullback or a reversal, especially for newbies in the Forex market. Imagine you thought the market turned down for a short-term and kept your trade open expecting the trend will continue. However, it was a trend reversal, and you suffered significant losses. |
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Difficult to predict. It’s hard to predict the beginning of the pullback and its end. You can easily miss the point when the trend resumes. |
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| # | Crypto | Prediction | Accuracy | CVIX | Price | 24h | 7d | Market Cap | 7d price change | |
| 1 |  BTC |
Bitcoin predictions | 83.6% | 29 | $62 880.79 | -0.34% | 4.85% | $1 242 317 669 377 |  |
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|---|---|---|---|---|---|---|---|---|---|---|
| 2 |  ETH |
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| 3 |  USDT |
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| 5 |  SOL |
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| 6 |  USDC |
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| 8 |  DOGE |
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| 9 |  TON |
Toncoin predictions | 77.6% | 44 | $5.60 | -2.18% | -3.72% | $14 181 556 392 |  |
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| 10 |  TRX |
TRON predictions | 90% | 8 | $0.151989 | 0.52% | 2.08% | $13 172 859 955 |  |
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| 11 |  ADA |
Cardano predictions | 78.4% | 41 | $0.351275 | -0.56% | -2.33% | $12 632 078 921 |  |
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| 12 |  AVAX |
Avalanche predictions | 73.6% | 45 | $27.30 | 2.88% | 10.29% | $11 081 593 423 |  |
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| 13 |  STETH |
Lido stETH predictions | 93.6% | 1 | $2 941.39 | -0.40% | -3.32% | $10 258 752 564 |  |
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| 15 |  WBTC |
Wrapped Bitcoin predictions | 90.8% | 1 | $65 806.83 | 0.78% | -2.68% | $10 083 957 608 |  |
