May 14, 2010 18:31

Pullbacks and Throwbacks

Posted In: Forex Q&A
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Most often used in breakout strategies, pullbacks and throwbacks allow traders to confirm a breakout in a certain direction without sacrificing a good entry price to do so. The trade-off is that if a pullback or throwback does not occur and the breakout continues then the trader might miss out entirely.

A pullback occurs in a downtrend the price breaks through a support level and then retraces to that former support level (now resistance). A common trading strategy is to then enter short at or near that resistance level as many traders who missed out on the breakout now want to enter short.

A throwback is similar to a pullback but occurs in an uptrend after break of resistance.

Trading tip: the stronger a support or resistance level is (which usually correlates with higher timeframe charts) the more significant a breakout is. Very strong levels might have lots of stops behind then and produce a strong short squeeze or long squeeze situation. In those cases a pullback or throwback or is still possible but might take more time to develop. It is always best to wait for a sustained break of important levels to avoid false breakouts.

7 Comments on "Pullbacks and Throwbacks"
  1. Avatar of gundala
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    Comment left on:
    May 14, 2010 at 23:17
    gundala says:

    very good example and lesson.
    keep it up :)

  2. Reply
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    Comment left on:
    June 17, 2010 at 09:07
    ssss says:

    goog keep it up

  3. Reply
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    Comment left on:
    July 16, 2010 at 13:51
    Lordsbe says:

    Thanx for the strategy lesson that analyses the above charts , never knew about false breakouts that it can be deceitful. iwill review more of your analysis.great work!

  4. Avatar of thyclinic
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    Comment left on:
    September 6, 2010 at 21:58
    thyclinic says:

    Excellent explain.

  5. Avatar of john1985
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    Comment left on:
    September 25, 2010 at 15:28
    john1985 says:

    thanks for great example.

  6. Reply
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    Comment left on:
    March 14, 2011 at 11:32
    Fred says:

    I find that reading the advise provided more than once, helps one to stay on track. Thanks for the value information.

  7. Reply
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    Comment left on:
    March 15, 2011 at 13:14
    chiadikobi jp says:

    Thanks,this is insightful

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