Trading pullbacks and reversals: Simplifying a once complex retail trading strategy

March 25th, 2024

Trading pullbacks and reversals used to be a manual process, requiring much effort, and done on charts that were highly detailed and often difficult to read. Now, with the power of the latest technology and NinjaTrader doing the heavy lifting, the right trading tools will do the hard work for you regarding probability pullback zones, targets, and trailing stops.

In the recent NinjaTrader Ecosystem webinar “Trading Pullbacks and Reversals,” Paul Bratby of Global Trading Software explained how trading pullbacks and reversals work.

  • Pullbacks: When a stock in futures is trending, there will be inevitable pullbacks. Officially, pullbacks are a pause or moderate drop in an instrument pricing chart from recent peaks that occur within a continuing trend. In reality, some traders are taking a little profit on their position but not enough to reverse the trend—just enough to cause a bit of pullback.
  • Reversals: Officially, reversals are a change in the direction of an asset. In reality, reversals occur when too many traders take profit on their positions. This starts that bull rolling down the hill, and we start to get a reversal in that original direction.

Measuring pullbacks and identifying reversals (trend failures) properly requires thorough knowledge of Fibonacci and Stochastic theories.

Bratby covers three types of trading signals for pullbacks and trend reversals to help you keep your charts clutterfree. He also shows his own at-home setup, which includes color-coded charts for the different strategies he utilizes when trading.

Bratby goes in depth on trading pullbacks and reversals in the full presentation.

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