Thread: Why does price make a pullback after a break?

After a break of support or resistance, why does price sometimes earn a pullpack? What's the physcology behind it?



In the above mentioned example why did price make a pullback after the trend line break? Is it because the buyers from the swing low sold their ranks and took profits resulting in price to pull ?

Originally Posted by ;

quote News events have the capability to instantly alter the perspectives of market participants about the price where a particular currency pair should be trading. For instance, have a peek at the chart below that shows the market reaction to the Nonfarm Payrolls report on March 8, 2013. image GBP/USD dropped from 1.50361 to 1.49972 in one tick. Yes one tick! Meaning there were no prices quoted by the liquidity suppliers in between these prices. That is because they didn't need to take the risk of placing a bid on the market at a higher price....

Exactly.for some reason most dont see that it is lack of bandwidth during and just after news.

Originally Posted by ;

quote News events have the potential to instantly alter the perspectives of market.

Thanks for a fair reply.

Approximately once a month for the last X of years I have received a (broker) message, typically before
FOMC or NFP. In part, it reads as follows;

Risk with News Trading

As with all major economic releases, there might be substantial price volatility with this announcement. Currency spreads will typically expand just before the discharge and will stay broad for a few minutes after. If the announcement is a shock to the consensus estimate, the price of the currency pair may gap considerably. As an example, the price on the EURUSD trading in 1.2820 - 1.2822 just before launch could gap up 60 pips to 1.2880 - 1.2882, with no available prices accessible between the price of 1.2820 and 1.2882. A Buy Cease placed prior to the announcement at 1.2830 would turn into a Market Order and would be filled in the prevailing price 1.2882. The exact same would be true using a Sell Stop.

Around four years back we saw a gap of approximately 200 pips on the GBPUSD to a Non-Farm Payroll announcement. Even though this is an extreme example, it nevertheless is an opportunity with trading during economic announcements. Consequently, plan on the spreads widening and, even if you're trading using a Buy or a Sell Stop entry order, don't expect being filled at your entrance price. You will be full in the prevailing market price after the launch, which might be substantially different from your desired price of your entry order.

Please be informed that due to the volatility of price fluctuations during the news, it is possible to see a delay in execution due to the extra verifiion necessary for each transaction.

So in the very least, there are a couple of traders on the exact same page now.

Kind Regards