Pull Back and Throwback: Essential Tools for Experienced Traders

Many traders often become confused when they see a price slowdown, unsure whether to execute a trade or just wait for the next signal. The main issue stems from confusing Pull Back with Throwback and genuine trend reversals (Reversal), which, although similar in appearance, have significantly different implications for returns.

Key Differences to Remember: Pull Back vs Throwback

A Pullback occurs within a declining trend. It is a temporary rebound before the price resumes downward movement to create a new lower low (Lower Low) along the same trend. A Throwback, on the other hand, happens in an uptrend where the price dips slightly but does not break the support level, then reverses upward to form a new higher high (Higher High).

Both share an important trait: the price does not break support or resistance levels and is supported by lower (Volume) trading volume, indicating that the move is likely just profit-taking rather than a true trend reversal.

Reversal is Not a Pullback: Common Mistakes Leading to Losses

A frequent misconception is treating a Reversal as if it were a Pullback, attempting to enter trades in the same direction as the prior trend. When a true Reversal occurs, the signals are markedly different:

Reversal Signals:

• Price breaks through strong support/resistance levels
• Trading volume spikes high, not low
• Clear price patterns (Head and Shoulders, Double Top, etc.)
• The subsequent move is in the opposite direction

Pullback/Throwback Signals:

• Price does not break support/resistance
• Trading volume remains low (indicating profit-taking only)
• The price resumes its original trend afterward

Effective Pullback Entry Strategies

1. Using Pullbacks/Throwbacks after Breakouts

When the price breaks through a significant support or resistance, it is often retested — this is the retest phase. This is when a Pullback occurs. Instead of jumping into a position immediately, wait for the price to retest the level and use that as an entry point. Place your Stop Loss at the lowest point of the breakout candle. This approach offers better risk-reward and smarter entries.

2. Ladder Strategy (Step Trading)

In a clear trend, prices tend to move in step-like increments. Throwbacks in an uptrend usually end at the first candle’s level, while Pullbacks in a downtrend end at the previous high. Use these levels as repeated entry points for different timeframes.

3. Pullback along a Trendline (Trendline)

Properly drawn trendlines can indicate where Throwbacks or Pullbacks will pause. In an uptrend, a Throwback will test the trendline acting as support, often not going too far. This touchpoint is a common entry zone for experienced traders. In a downtrend, use the trendline to identify Pullback entry points for short positions.

4. Fibonacci Retracement for Precise Estimation

In strong trends, price Throwbacks often stop at 23.6%, 38.2%, or 50% Fibonacci levels of the prior move. Pullbacks also tend to respect these levels. Use these Fibonacci levels as multiple entry points (Scale In) and set Stop Losses beyond the 50-61.8% levels, which indicate potential trend reversals.

Using Volume to Differentiate Pullbacks from Trend Reversal Signals

Low trading volume is a signature of genuine Pullbacks and Throwbacks. If you see the price dip or rise while volume remains relatively low, it signals that investors are merely looking for new entry opportunities. Conversely, if volume surges unexpectedly, it could indicate a true trend change. Avoid entering trades in such cases.

Cautions for Traders

Many enter positions expecting a Pullback or Throwback to occur, but the price continues in the trend without a dip. In such cases, do not force a Pullback if technical fundamentals do not support it. Follow the price action instead. Also, set your Stop Loss appropriately—not just “close” to support or resistance— but outside the high or low of the breakout candle.

Summary

Once you understand Pullbacks and Throwbacks, they become powerful tools for entering trades with favorable conditions. Apply the four strategies above to different situations, confirm with Volume and Fibonacci levels, and you will gain more confidence in your decisions. When used correctly, your win-loss ratio will definitely improve.