A temporary reversal within a larger trend, offering potential entry points.
A pullback is a short-term move against the prevailing trend. In an uptrend, a pullback is a temporary dip before price continues higher. Pullbacks are normal and healthy — they allow the market to consolidate gains before resuming the trend. The key is distinguishing a pullback from a full reversal.
Pullbacks offer some of the best risk-to-reward entries in trading. Entering during a pullback in a strong trend means you buy at a discount (or sell at a premium in a downtrend), with a tight stop loss and a clear trend direction in your favor.
A stock is in an uptrend, moving from $50 to $60. It then pulls back to $55, near a rising trendline and the 20-day moving average. A trader enters long at $55 with a stop loss at $53, expecting the uptrend to resume toward $65+.
A pullback is a temporary dip within an uptrend. The green dot shows an ideal entry point as the trend resumes.