Buying the Right Pullback

Discussion in 'Technical Analysis' started by TraderZz, Feb 5, 2011.

  1. TraderZz


    Thought I would start something that's interesting to me from a trading POV.

    There is a lot of talk in all trading circles that 3 pushes or 5 waves are classic reversal patterns.

    While I agree (depending on the timeframe you are watching), I have also noticed something else.

    Given the choice of Entry #1 or Entry #2 without any other price data, I would choose #2 based on my own stats. This goes against the common convention, but it is my current experience.

    I have reasons to believe that if it holds twice, there is at least slightly higher chance of a trend market on the way and possibilities for adding along the way.

    What are your thoughts?
  2. I believe the chart to the left is more important than what you have drawn to the right.

    Buying pullbacks on simple support & resistance analysis works best in a strong trend.

    Some charts from other traders
  3. .
  4. TraderZz



    Agree with you about whats on the left.

    I posted with the assumption that this is a new issue and there is no data on the left.

    Lets also mention the "character" of price while we're at it.

    I would like to add that prior to entering a pullback if your signal is a 3br such as stealth, it is wise to consult prior entries on the chart and see if the market is chopping after confirming 3brs on similar entries, or if we are continually hitting HHs LLs.

    What i was stating with the graph is, the more price waves we get with HHs provided we are NOT at resistance, the greater the chance of continuing to make HHs.

    This is opposite from what I understand most people feel as most people are continually looking for the end of the trend.
  5. Nice charts EK, thanks for posting.

    (Possible small correction on chart #2 (?) - I think you may have meant "HL"s instead of "HH"s on that triple bottom and "HH4".)

    Also, perhaps it's just a matter of semantics, but I would disagree with the statement "Predicting the next move is for fools". Regardless of our trading method or signals, we are all "predicting" (= "expecting") price to move a certain direction within a certain timeframe, otherwise why else would we put our money at risk? I would agree that predicting a price reversal in open space (top/bottom calling at new highs/lows) can be suicidal if you're not extremely well prepared.

    Anyway, once again, nice posts.

  6. It is too much of a generalization for me to work with. There are maybe 20 different things from the micro to the macro timeframe that I would consider, where price is on the wave count is very low on the list. Maybe I see something, maybe I miss most of the signals, in the end I make a decision on the cumulative evidence that I can gather, and only execute when I can have a small stop in place.

    If you can trade with 3brs or break outs or candle patterns on a single time frame or volume chart, good on you, Im sure it can be done, I'm not that good and thats not my method.
  7. TapeReader

    TapeReader ET Sponsor's my take on it.

    Uptrends will last as long as there is enough buying pressure to keep the trend alive.

    Downtrends will last as long as there is enough selling pressure to keep the trend alive.

    If there is an uptrend, it is because the demand from Buy Programs is greater than the demand from Sell Programs.

    If there is an uptrend that experiences a pullback, this can lead to two outcomes.

    1. The Buy Programs resume their buying in earnest and the trend will continue.

    2. The Buy Programs will not resume their buying and the market will either meander, or the Sell Programs will do their thing, and then the market will go down.

    With this in mind, if you want to trade a pullback, it makes sense to me to wait (In the case of an uptrend), for the Buy Programs to resume what they do best, which is Buy.

    We publish the contrails and footprints of Buy and Sell Programs in real-time (and for free) at Free Order Flow Monitoring Service

    Here's some examples on how to trade an ABC pullback and jump into the trend:

    Using Order Flow As A Confirmation To Enter A Trend

    Hope this helps...
  8. risky63


    heres a real chart that I traded. I annotated it for a friend thats a newb that I've been helping out. ooops no chart
  9. risky63


    here it is
  10. TraderZz


    Thank you for the chart. Would you be able to explain your count by any chance?

    I do not understand the annotations...
    #10     Feb 6, 2011