Pullback Trading

Pullback trading is a strategy where a trader waits for a security that is in an established uptrend to temporarily retrace a portion of its recent gains before entering a long position at a more favourable price, in anticipation that the primary trend will resume. Rather than chasing a stock at its highs, pullback traders buy the dip within an uptrend—using moving averages, Fibonacci retracement levels, or prior support zones as reference points for entry. The approach improves the risk-reward ratio of each trade and aligns with the broader trend. A disciplined stop-loss placed below the pullback low protects against the scenario where the retracement turns into a full trend reversal.