What are Pullbacks and Throwbacks in Trading? ▶ Real Examples in the Market
Financial markets are characterized by moving in trends, but this movement is not linear. Often, we observe price retracements known as pullbacks.
The term pullback is widely used in the trading field, although many traders do not use it correctly.
📈 What is a Pullback in Trading?
In the stock market context, a pullback refers to the momentary retracements that interrupt a trend, generally to rest on a previously surpassed support.
Often, traders use the term pullback to describe any retracement that touches a support or resistance before the trend continues; however, it is crucial to understand that the concept of pullback mainly applies to bearish trends.
On the other hand, when we talk about retracements within bullish trends, we refer to a throwback, which we will discuss later.
📈 How to Detect a Pullback?
We can identify a pullback when, after a rebound, the price fails to break the old support (which now acts as resistance) and resumes its bearish trend. This brief pause in the trend can provide valuable signals to enter the market, especially to open short positions before the trend continues.
The image below illustrates in a simplified way the concept of pullback in Forex trading.
