Pullback

A pullback is a temporary move against the prevailing trend, such as a dip inside an uptrend. A pullback rule buys the dip when the trend is still up.

How Pullback is calculated

A rule needs two definitions: the trend (for example, close above the 50-bar average) and the pullback (for example, RSI(14) below 40, or a close at or below the 20-bar EMA). Entry is when both are true. Exit is a recovery, a time limit or a stop.

How it is read

The idea is a better entry price than chasing a breakout. The risk is that the pullback is the start of a reversal.

Common mistakes

• Calling any dip a pullback. Without a written trend test, every fall is one until it is not.
• Setting no stop because the trend is up. Trends end.
• Judging it only on assets that kept rising.

Test it yourself

• See it on the free Practice chart

What Tickfloor tested

Tickfloor's research desk has backtested 678 strategies, net of modelled trading costs. After correcting for the 761 tests run, 0 passed. That does not prove no strategy works. These are historical diagnostics, not validation under Testing Standard v2: the backtest harness predates that standard and has not been re-run to meet it.

• Buy the Dip (claim test)

Related concepts

• Mean reversion
• Exponential moving average (EMA)
• Support and resistance
• Stop loss
• All concepts

General information only. It doesn't consider your objectives, finances or needs. Tickfloor holds no financial services licence and never places trades.

• See a full worked example (free, no account)
• Browse every course lesson by topic