What is Pullback in Trading?
Pullback in trading is basically a retracement of an impulse move which can be with a single candle or number of candlesticks.Bearish candlesticks in a bullish move and bullish candlesticks in a bearish move are simply called the pullbacks.
What is Valid Pullback in Trading?
As we discussed earlier pullback is a retracement move, but every retracement is not a valid pullback.We will be dividing valid pullback in two types listed below.
Valid Pullback in Bullish Market
As you know when prices move higher its called bullish market, So in bullish market the bearish candles are simply the pullbacks.But to identify a valid pullback in bullish market you have to check following things.
(I) Mark the highest bullish candlestick before the pullback candlestick.
(II) Mark the low of that highest bullish candlestick.
(III) Check if the low of that highest bullish candlestick is grabbed by the pullback candlesticks.
(IV) Check that after low (of the highest bullish candlestick) being grabbed the high (of the highest bullish candlestick) is broken.
For grabbing the low , you just have to check if price went below the low no matter by just a wick or candlestick closing
But for breaking the high closing of candlestick above the high is compulsory
A real market example is shown below in the picture.
Valid Pullback in Bearish Market
As you know when prices move lower its called bearish market, So in bearish market the bullish candles are simply the pullbacks.But to identify a valid pullback in bearish market you have to check following things.
(I) Mark the lowest bearish candlestick before the pullback candlestick.
(II) Mark the high of that lowest bearish candlestick.
(III) Check if the high (of that lowest bearish candlestick) is grabbed by the pullback candlesticks.
(IV) Check that after high (of that lowest bearish candlestick) being grabbed the low (of that lowest bearish candlestick) is broken.
For grabbing the high , you just have to check if price went above the high no matter by just a wick or candlestick closing
But for breaking the low closing of candlestick below the low is compulsory
A real market example is shown below in the picture.
NOTE : This all phenomenon of valid pullback may happen with a single candlestick or number of candlesticks.
