A pullback occurs when there is a pause or moderate retracement in the price of a given asset. This market price retraces are due to the recent peaks that occur within a continuing uptrend. The image below clearly explains what a "Valid" Pullback looks like.
There are two types of Pullbacks, namely:
a. Corrective Pullback
In a corrective pullback, price returns to the Demand Zone and sweeps the existing liquidity around that key level .This also indicates that there's no selling pressure. The pullback is moderated, not agressive.
b. Impulsive Pullback
In a Impulsive Pullback, price drops impulsively and agressively.
There's no interest in price stopping at the Demand Zone. In this situation, the uptrend structure broken and lost. It is not convenient to place a buy in the Order Block at this levels. In simple terms: "Don't catch a falling knife".
How to identify Pullbacks?
1. Moving Averages (MA)
Some Indicators as MA's are very useful to identify Pullbacks.
This is a "Corrective Pullback" in $BTC Price Action. Price retraces to 100MA in the Daily Time frame, and from there bounces and keeps the Bullish trend intact.
Price DOESN'T lose the TREND.
2. Bollinger Bands (BB)
BB is a great indicator to identify trends. In this example, we can find a "Impulsive Pullback" in $BTC Price Action. Price doesn't react to the Demand Zone, therefore, an agressive sell happens. When you see the price losing this levels, DON'T BUY.
3. RSI
Through the RSI you will can identify HIGHS and LOWS of the current MS.
In this example, you can see "Corrective Pullbacks" None of this Pullbacks lose the current trend. RSI will identify us the HIGH and the LOW of this Pullbacks.
