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What I Thought Was an “Pullback” Was Just a Downtrend
Many people who say, “I bought on a pullback,”
are actually buying at the entry of a trend reversal, not a pullback.
are actually buying at the entry of a trend reversal, not a pullback.
“I bought thinking it was a pullback in an uptrend, but it just kept falling.” Many people have had this experience.
Why does this happen? The reason is simple.Because they cannot distinguish between a pullback and the start of a trend reversal.
A pullback and a reversal to a downtrend look similar on the chart. In both cases, after an advance, the price moves downward. However, the subsequent moves are completely different. If it’s a pullback, prices rise again. If it’s a trend reversal, they continue to fall.
Entering while unable to distinguish these two is like flipping a coin.