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Learning how to trade pullbacks can be a great skill as a trader. Pullbacks happen all the time and if you learn how to trade pullbacks, you can enhance your repertoire and find many more high probability trading scenarios. Pullbacks come in many different forms and in this article, I explain the five most common ones. You will also learn different pullback entry techniques.
What is a pullback?
The price never just follows a straight line and the price movements on any financial market can usually be described in so-called price waves. The markets alternate between bullish (rising) and bearish (falling) trend waves.
During an uptrend, as shown in the graphic below, the dominant trend waves moved higher. The correction waves represent moves against the ongoing trend direction. When trading pullbacks, traders look for those correction phases and then time trade entries during such phases.
The idea is that you want to wait for the price to “pull back” during a trend to ...
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