So I was learning about the conservative way of trading support and resistance where instead of entering on the break you enter after a pullback to the broken support level. But why may there be a pullback when people are liquidating long positions? Surely this would just send price down further instead of a retrace to the broken support level?
Short term traders taking quick profits can cause that. They will buy/sell on the reversal like everybody else but then they will lock in profits quickly instead of riding it out.
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indeed - exactly so, especially in the short-term
if people are selling, others are buying: it may be stating the obvious, but every transaction has (at least) two parties, and long positions being liquidated are being bought by someone, too - what matters and moves prices is really the (less short-term) overall imbalance between buying pressure and selling pressure - maybe not the most insightful observation in the forum(!) but something it’s still sometimes easy to lose sight of
Maybe some people have buy orders at those levels too.
Exactly. And why pro winning traders would wait until the price moved down to where they can add to their positions. And once that occurs, in will come the crowd. As the trend is more likely to continue than not, it’s just a positive probability risk to hold tight.