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"Breakout, pullback to go long; breakdown, rebound to go short."
After a breakout at a key level, there often follows a pullback to retest the previous support or resistance.
The significance of this pullback is that it tests whether the breakout is genuine.
If the price can stabilize during the pullback and then rise again, it indicates that the breakout is valid. Conversely, if the pullback fails and the price is quickly pushed back down, it means the breakout was a false signal, and the market returns to the original range.
Many traders tend to chase orders at the moment of a breakout, only to be stopped out by the subsequent pullback.
A more prudent approach is to wait for the breakout to occur, then observe whether the pullback stabilizes, confirming that support holds or resistance is effective before entering a position.
Of course, we are not seeking a 100% pullback in price, but rather to recognize the price patterns that indicate a pullback, making it easier to trade and reducing judgment costs.

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