What are pullbacks and why are they important ?

Definition

A pullback is a small pause from a previous trend in a stock or any other securities (index , commodities , futures ) etc. that occur within a continuing trend.

Following is the chart ,

You can see initially the trend is downwards,
2 green arrow and a red arrow shows the pullbacks.
Its clear that the pullbacks are in the opposite direction

Importance of Pullbacks

Pullbacks plays an important role in determining the future price points where the price will reach

Notable Point :

There are certain data points or prices that are crucial for entering into the trade , and making
positions, so  data points  at the pullbacks are one of them.

If you look closely to the second green arrow , after this pullback , you can in future time frame
around the red arrow and the two violet arrows , price follow floated around this pullback.


At these points you will see some reversal of prices

So its very important while you trade whenever you see pullbacks , mention it in the charts.
This will give you some rough picture about the future price trends.

In the next blog , I will show some more theories related to pullbacks.


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