Trading glossary
What is a pullback?
A pullback is a temporary move against the trend that does not break the trend's structure.
Trends do not move in straight lines. In an uptrend, a pullback is a decline that ends above the previous swing low, after which the trend resumes. In a downtrend it is a rally that ends below the previous swing high.
Pullbacks are where many trend traders prefer to enter, because the distance to invalidation is shorter than after a breakout.
How traders use it
- Use the previous swing as the line between a pullback and a reversal.
- Look for pullbacks to meet a level, such as old resistance or a moving average.
- Wait for price to show it is turning back with the trend.
Example
Ethereum rallies from 3,000 to 3,600, then drops to 3,350 and turns back up without breaking 3,000 or the previous swing low at 3,200. The fall to 3,350 was a pullback within the uptrend.
Frequently asked questions
What is the difference between a pullback and a reversal?
A pullback holds above the previous swing low in an uptrend (or below the swing high in a downtrend). A reversal breaks it.
How deep is a normal pullback?
It varies. Fibonacci levels such as 38.2%, 50% and 61.8% of the previous move are common reference points.
Related terms
Related patterns
Educational content only, not financial advice. Chart patterns describe probabilities, not certainties, and every pattern can fail. See our disclaimer.