September 2, 2019

Top Strategies for Mastering Pullback Trading

Pullbacks, in terms of technical analysis, generate all sorts of trading opportunities after an active trend thrusts higher or lower, but profiting with this classic strategy is harder than it looks. For starters, the security you just bought on the dips or sold short into resistance can keep on going, forcing your position into a sizable loss, or it can just sit there gathering dust while you miss out on a dozen other trades. So what skills are needed to book reliable profits with pullback strategies, how aggressively should those profits be taken and how do you admit you are wrong without breaking the bank? In this article, we will consider some historical examples to illustrate these concepts.

Pullbacks

Let’s outline the most favorable technical conditions for a pullback to turn on a dime as soon as you take a risk in the opposite direction. First, you need a strong trend so that other pullback players will be lined up right behind you, ready to jump in and turn your idea into a reliable profit. Securities lifting to new highs or dumping to new lows fulfill this requirement after they push well beyond a notable breakout or breakdown level. Vertical action into a peak or trough is also needed for consistent profits, especially on higher-than-normal volume, because it encourages rapid price movement after you get positioned. It is also best when the trending security turns quickly after topping or bottoming out, without building a sizable consolidation or trading range. This is needed because the intervening range will undermine the profit potential during the subsequent bounce or rollover .

Read more at https://www.investopedia.com/articles/active-trading/020415/top-strategies-mastering-pullback-trading.asp

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