Patterns for Pullback Trading

In his recent NinjaTrader Ecosystem webinar The Hesitant Pullback Trade, LizardIndicators co-founder Kris Lassen explained what patterns to look for when pullback trading.

First, he said that there must be “an obvious price move” happening in the market before you can look for pullbacks. Lassen explained that, for a market trend to continue, there must be a “sustained imbalance between supply and demand”. This sustained imbalance is what creates continued price movement in a specific direction. He then defined a pullback as a “short-term weakness” in that steady price movement.

For example, a market may be in the middle of an uptrend but still see price drop (or pull back) in the short-term before it continues up in line with the trend. That brief price rejection could be seen as a potential buying opportunity if the price continues to rise afterwards.

However, there is still risk involved. It is possible that a drop in price could signal the end of an uptrend, rather than being the “short-term weakness” that a pullback trader would like. Lassen also recommended avoiding larger price rejections (what he called “aggressive reversals”), because the risk of the trend reversing and the trade failing is high.

This also means pullback traders should keep an eye on momentum. If momentum begins falling off, it could signal that the uptrend is dying and the market may begin to consolidate or reverse.

In this short clip, Kris Lassen explains in greater detail what he looks for when pullback trading, as well as some red flags to watch for. If you are interested in learning more about pullback trading, be sure to check out Lassen’s full webinar.

If you enjoyed this clip, be sure to check out the full library of free, on-demand webinars from the NinjaTrader Ecosystem.

Not sure where to start? You definitely don’t want to miss out on these events, also hosted by Kris Lassen: Analyzing Candlestick Patterns and Understand Market Bias, Key Price Levels and Trade Setups.

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