Pull back vs reversal

[anglagard]

Quote from NoDoji:

That may be a potential reversal signal but it's not a "pullback". The OP wants to know how to distinguish pullbacks in a trend from trend reversals.

I guess it depends on the length and strength of the prevailing trend. The longer and stronger the more probable any pullback is a pullback and not the beginning of a reversal.

Aside from using statistics I don't know how to be sure myself.

 

[NoDoji]

Quote from anglagard:

Aside from using statistics I don't know how to be sure myself.

You can never be sure about the outcome of any trade. But there are price footprints that place the odds in your favor over time.

 

[Roxiticus]

The truth is that you will not know if the pullback is the start of a reversal or just a pullback (pause) and the trend will resume.

This is where you are going to have to make some judgement calls. A lot depends on the strength of the move, the magnitude of the pullback,what the sector is doing and what the overall market is doing. The past couple days there are pullbacks and resumes all over the place. I know some guys like to short the pullbacks with the intention if the position starts to rise and go against them and is about to break through the previous pivot high then will reverse position and go long. I prefer to put the trade on once it takes out the previous high. the price should not fall back below the pivot high price in any meaningful way. if it does then you might want to reduce some of your risk. pullbacks and trend resumption trades tend to be some of the best risk reward trades in the marketplace that i can see. IMHO