The Untold Secrets of Pullbacks in Forex Trading| Complete Guide to Pullback Trading
you must have heard people saying this buy the dips and short the reps or buy low and sell high but how to do this exactly the answer is the answer is pullbacks hello and welcome to forex monopoly my name is daksh and in this video i will tell my secret technique of trading pullbacks and not only that but i'm also going to share my secret technique to identify between a pullback and a reversal so that you don't fall for the pullback trap so make sure you watch this video till the end now before revealing the secret of trading pullbacks i want you to first understand what a pullback is and how is it formed and this is going to be the most important part because you cannot trade pull backs in a better way if you don't understand at first so let's first understand what are pullbacks how is it formed and then i will tell you about my secret technique that will change the way you trade pullbacks so what are pullbacks when the price is in a trend it will never move up or down in a straight line all the time there will be instances where it moves away from the trend if you open any price chart of any currency pair and observe the trends you will see that price most often moves along the trend and has a minor move against the trend from the time to time and this minor price movement against the trend is what we know as pullbacks to make things more clear to you imagine from this level the price moved up and then the price started a correction so if the price is trending in any one direction then this level to which the price moved is called as pullback and finding out exactly when the pullback will end and capitalizing on it is called pullback trading now that you know what a pullback is let us understand how are they formed because it is really going to be helpful while you trade pullbacks by the way if you are enjoying this video make sure you hit that like button so why do these pullbacks occur when a price is moving in an uptrend it means that the buyers are outweighing the sellers and they are heavily buying and taking the price higher now if the price is in a downtrend then sellers are in control and actively selling and moving the price down this activity of buying or selling cannot keep on going all the time there are times when buyers and sellers get exhausted and it seems like they are taking some rest in the meanwhile the opposite market participants look to gain control of the market and try to raise the price in the opposite direction of the current trend and this is when the prevailing trend passes participants resumed the activity and now the price is available at a lower or a discount price to them and this further intensifies their activity and price resumes in its prevailing trend now that you know what a pullback is and how is it formed i will tell you my secret technique to trade pullbacks but before we move to that here is a really important thing i need to talk to you about i have always been asked a lot of questions about trading pullbacks and riding a trend and there are some most common questions which i always get and you may have it too like how to know when the pullbacks will end or where to put the stop loss and also do you need to really wait for the confirmation to enter into a trade i totally understand how you feel and what your questions are and i know many traders have a lot of trouble trading pullbacks and they get frustrated from losing and finally give up on it they don't succeed because they do not know the small secret that i'm about to reveal and this secret is simple yet very powerful and will solve the majority of the problems related to pullback trading so make sure you pay attention to this so the secret is classifying pullbacks into different types to solve all the problems associated with pullback trading i developed a technique and in that technique what i did is divided pullbacks in three different types and used three different ways to trade each one so the three different types of pullbacks are type 1 type 2 and type 3 pullbacks type 1 being the small pullback type 2 is the medium pullback and type 3 is the deeper pullback now let us first try to understand each one of them and then i will tell you the ways to trade each one separately so basically there are three different types of pullbacks the type one pullback the type two pullback and the type three pullback now let us start by understanding the type one pullback or the short pullbacks the short pull back represent that the party dominating is highly active and the most important thing or the most easy way to understand the type of pullback you are seeing is using the fibonacci retracement like if there is a type 1 pullback you will always see that the pullback is less than the second level of fibonacci that is less than 0.382 that is after an impulse the price will retrace less than 0.382 like if we drop fibonacci retracement from this point and then we take it till this point you will see that we have a pullback over here but the pullback is very small and this is the type one pullback because the price have not retraced till 0.382 so anything above 0.382 will be type 1 pull back now we will see how to trade the type 1 pullback after we are done understanding the next two types of fullback so the next type of fullback is the type 2 pullback now this is also called as the medium pullback and it tells us that the party dominating is now facing a counter trend pressure and the most easiest way to find out if this is a type to pull back is by using fibonacci retracement and if after drawing the fibonacci retracement the price has retraced or pulled back till 0.382 or let us
say it is 0.618 level then that will be our type 2 pullback for example let us consider let us draw a fibonacci retracement from this point to this high over here this will be our new highest so we are joining from the start to the new high because this high is higher than the previous one so now we have a new higher high so for that we always drop fibonacci from the lowest point to the new higher high which will be over here so in this case you can see after this move the price then retrace till 0.382 level so anything on z so anything on 0.382 or till 0.618 will be type 2 pullback now again i will tell you how to treat these pullback but first let us go and understand the third type of fullback which is going to be very very important because these are where a lot of people lose their money that is the type three pull back the deep pullbacks so in type three pullbacks what happens is the party dominating earlier takes rest and so we see a huge counter trend movement in the opposite direction so in this what will happen the easiest way to understand the type three pullbacks is by again drawing fibonacci retracement and this time the price will retrace more than 0.618 and most of the time till the level from where you do the fibonacci ratio for example let us say the price moved from this point and it moved till this level now most of the times what happens is like let us say this is one single move and now to spot the pullback let us say if the price retraces till 0.382 or 0.618 we have type 2 but then when it retraces below it then we have type 3 pullback
and most of the time we see a retracement till this level from where the initial move begin which will in this case will be support and in a downtrend that will be the resistance so along with the fibonacci retracement you can also you use the higher high and higher low technique to understand this and if you haven't watched that video of higher highs and higher lows you can check it out by clicking the i button so just to give you a brief what is the high and high low technique is let us say when the price moves up it creates a higher high then a higher low and then a higher high higher low then a higher high and this is how the price moves in a trending market so this will be the pullback then again a pullback now this time the price should give a pullback which is higher than this one but when there is a deeper pullback we see that this pullback or the retracement goes to the initial level from which the first move begin which will be this level so many times when we try to draw a fibonacci from this level to the new high and when the price moves down it will most probably retrace till the start of the first move which was this in this case so these are the three different types of pullbacks and i hope you understood everything now i will tell you how to trade each one so that you get better at it now that you know about the three different types of pullbacks let us quickly go to the chart where i will tell you how to trade each one with a different technique now let us learn how to trade each type of pullback and let us start with the type 1 pullback now as the type 1 pullback represent that the party dominating is highly active and as we get a very short pullback there is only one efficient way to trade it and that is using a breakout technique now if you don't know what a breakout technique or what a breakout is i've added a video on it and you can check it out by clicking the i button so to trade these type of pullback what you have to do is after a pullback you have to wait for the price to break out of the previous high or a previous low and when the price breaks out of it only then you have to enter a trade because that confirms that the pullback is over and now the price can move up and as the priority dominating is highly active it gives us a good win rate and we most often end up at the winning side so to trade these type of pullbacks you can enter after the breakout or after a new high is created in bullish market and then we can keep the stop loss a few pips below this level because what happens is many times the price will just move over here then it will again move down and then it will give a larger short or larger type one pull back and so to getting stopped out what we can do is keep a realistic stop loss below this below the initial pullback level for example let us say if we see this example here this was the type 1 pullback so to treat this what we can do is we have to draw or mark the high and then when the price moves above it and breaks out of it then we have to enter a trade over here and then we have to keep the stop loss below this pullback so that we are on a safer side so you can see after this pullback and when the price break out of this the price then retested the level and then it started moving up now let us again take a new example so if you see and take this as an example you can see that this is a type 1 pullback so in a type 1 pullback what you have to do is you have to enter after the breakout of the high so over here just draw a level and then when the price moves above it like it happened over here we will enter a trade over here and then keep the stop loss few pips below this and you can see how after this the price started to move up so this is how we trade the level one pullback now let us see how to trade that level two pullback now as we get to see a medium pullback in level two pull back what we have to do is we can use fibonacci levels plus moving averages and any type of candlestick patterns to trade level 2 pullback for example let us say this was a level 2 pullback so we will first draw the fibonacci retracement from this line to this line and after we get a confirmation that this is a level two pullback what we have to do is we have to use fibonacci ratios to enter a trade but using or taking entries only based on fibonacci retracement would is not a good idea so always mix that up with a moving average or let's say a candlestick patterns so in this case you can see that we had a bullish engulfing pattern at 0.382 level and so we could have entered a trade over here but then again based on how well you are able to predict the moves or how well you are at technical analysis you you would have to set your stop loss so your safe stop loss would be below this level which is 0.618 and your risk stop loss will be below the candle that is below the bullish engulfing candle now again let us take a few more examples for it so so if we see we again have an level 2 pullback over here so if you can see after this move the price corrected and then it gave a pull back till 0.618 level and there we got to see a bullish doji so we already had two confirmation that is the fibonacci level 0.618 rejection and also a bullish doji and plus we have a 50 period moving average and the price is rejecting it so we could have entered after the formation of this doji and then we have to keep our stop loss a few pips below this level and you can see after that the price started to move up so this is how you trade a level 2 pullback now the most important thing is to understand how to trade a level 3 pullback so let us now understand how to trade the level 3 pullbacks so as i told you in a level 3 pullback what happens is the price usually retraces to the initial level from where the move started or more than 0.618 so if you can see over here in this example the price almost retraced to the same level from which this initial initial big move started because let us say the price was up trending and creating high highs and higher lows so this was the high low then the price created a higher high then a higher low then again a higher high and then a high low so from here the new move begin and it gave a new higher high so after this high the price then gave a big retracement and then it retraced almost 100 percent of this big move so let us say if we draw a fibonacci from this point till the new high you can see the price almost retraced to this level from where the price began so in such case that is the level 3 pullback what we have to do is the most important thing to look for is support and resistance in this case this was our support level and then the next thing to look for is a moving average like if there is a moving average which the price is respecting and the other things is using the candlestick patterns so we have to see if there is a candlestick pattern over here and then we have to enter a trade now if you don't have a candlestick pattern or let us say a moving average what you have to do is take the fibonacci retracement and go to the previous high low which in this case was over here and then draw a fibonacci retracement from this low to a new high which will be over here and we only did this because this time after this move the price retraced hundred percent and so to draw a new fibonacci what we have to do is we have to start from the beginning of the big move which would be over here and to the high which will be over here and then we got a retracement 0.618 level and then we also have a support so we could have an entry over here and we can keep the
stop loss few pips below this level depending upon the time frame which you are using and also the volatility of the chart so this is how you trade three different types of pullbacks and this is how and this is the best technique to win trades using pullback technique now here we are at the most important part of this video my secret technique of identifying between pull back and reversal so that you don't fall for the pull back traps so let's quickly go to the chart to understand this so the most important thing for understanding this technique is to understand how trends work and how highs and lows are formed so there is a very simple thing in trending markets when the market is uptrending the price creates higher highs and high lows and it moves something like this in which the higher lows will be the pullback or the levels to which the pullback ends and in a downtrending market the price will move like this and create lower low lower high lower low lower high lower low lower high and lower low and it will move like this in which the lower high will be the pullback to which the price retraces and the new wave or new impulse begin so to distinguish between a pullback and a reversal you have to understand how the highs and lows work properly so whenever the price is reversing you will see that when the price was creating higher high and higher low let us take the example of a bullish trend so in this uptrend the price was moving up and the price was creating high high high low high high high low high high and high low so whenever the price is doing this and instead of creating higher highs and higher lows and if goes on to create a lower low then this tells us that this is not just a pullback but a reversal can be now expected and the price can now start moving in the downward direction and the same goes on with the downtrending market like here the price was creating lower low lower high lower low lower high lower low lower high and lower low but now instead of creating a lower high and a lower low the price moved up and moved above the previous low high and created a new higher high indicating that the trend has changed and so this will no longer serve you as a pullback entry and you will have to change your bias to find bullish entries and go long from here like let us say if we take this example okay consider the price was moving up or was in a uptrending market the price was in an uptrending market so you can see the price was moving up then a low then moving up a low that is a high and a low then again a high and this time the price dropped down but when the price dropped down it did not move below this level so when the price doesn't move the below the previous higher low which in this case was this we still know that the bullish trend or the uptrend is still there and the price can move up because the buyer are holding their positions so again from here the price moved up and then it gave a new high move down then again a move up so again this time the price dropped till this level but the price did not move below the previous high low which will be over here and that confirms that it is not a reversal but a pullback a level 3 pullback and if it would have moved below this then we would have been we would have got a confirmation that the prices now change the trend that is the buyers are out and sellers are in and the price can now move down and the same thing would have happened over here if the price would have moved below this and created a lower low then we would have said that this is not a pullback but a reversal so this is how you spot between a reversal and a pullback i hope you enjoyed this video and if you did make sure you hit that like button and if you have any doubts let me know in the comment section below i will be happy to help you out also i am soon going to add a amazing scalping strategy that has a very high win rate so make sure you subscribe to this channel and turn on the notification bell so that you don't miss out on that amazing video see you soon
2021-05-20 04:27
