Forex pullback.

The movement of a trend in Forex never occurs in a straight line, as statistics show, the trend consists of 70% rollbacks and only 30% falls on the main trend.

Forex pullback is a price correction in the opposite direction from the main trend, after which movement resumes again in line with the prevailing trend. The magnitude of such a movement directly depends on the time period on which trading takes place; the longer the analyzed time frame, the longer the rollbacks on it.

A rollback is determined quite simply, just look at the chart of a currency pair and identify the main trend movement; all fluctuations in the opposite direction will be a correction, and the length of a correction candle can sometimes exceed the length of a candle in the direction of the trend.  

This concept is key when trading on any of the exchanges, since kickbacks are the main cause of losses for most transactions.

That's why it's so important to separate them from the main movement. The standard situation that one has to observe usually unfolds in this way: a trader opens a chart of a currency pair lasting 15 minutes and sees that, by all indications, the price is going down and there is a downward trend in the market.

After this, a sell transaction is opened, but then the price reverses and the position immediately begins to generate losses. This would not have happened if the trader had looked at older time periods and seen that on M30 and H1 the trend was confidently moving in an upward direction. This means that on M30 there is a rollback against the trend, which on M15 was taken as the main movement. Therefore, when trading, it is advisable to use the so-called “Rule of Three Screens”, taking into account the direction of price movement not only on the working time frame, but also on two neighboring ones.

At the same time, there are no rules without exceptions, and any Forex rollback can become the beginning of a new trend if it lasts long enough and there are significant reasons for the trend to reverse. It is the presence of such reasons that makes it possible to distinguish a simple correction from a trend reversal.

Trading on pullbacks.

In trading practice, there is also such an option for carrying out transactions; it is quite risky and is used mainly for short time periods when working with a scalping strategy.

to search for entry points ; trades are opened as soon as the price makes a reversal in the direction opposite to the main trend.

This strategy is quite risky, since the magnitude of the rollback in Forex does not have a fixed value and if the previous correction lasted 20 points, the next one may last only 10 points, and the main movement will most likely force you to close the deal with losses. Since the next price fluctuations will be in an even more unfavorable place.

It is less risky and most profitable to enter the market at the end point of the correction, when the trend turns again in the main direction.