A pullback is a temporary counter-move within a trend — a dip in an uptrend or a bounce in a downtrend. Trading pullbacks lets you join a trend at a better price and with a tighter stop than chasing the move at its extreme.
Where pullbacks stop
Healthy pullbacks tend to stall at logical areas: a prior support or resistance level, a supply or demand zone, or a previous swing point. When a pullback reaches such an area and shows the trend resuming, you have a defined place to enter and a defined place to be wrong.
Entry and stop logic
Wait for the pullback to reach your level and show a sign of the trend resuming — for example a strong candle back in the trend direction. Enter there and place your stop beyond the pullback's extreme (below the higher low in an uptrend). Because the risk is small and the potential move large, pullbacks can offer strong reward-to-risk.
- Only trade pullbacks in the direction of the established trend.
- Let price come to your level — do not force an entry mid-pullback.
- A pullback that becomes a break of structure against you invalidates the trade.
- Deep pullbacks past the last swing warn the trend may be weakening.
Pullbacks let you buy the dip or sell the rally with the trend — better price, tighter risk, same direction.