Tuesday, August 23, 2011

Two legged pullbacks vs A2 vs G2

There are two legged pullbacks and there are A2s. The difference is that an A2 is around the ema, including just slightly above to overlapped. A shallow 2 legged pullback such as b13 or b36 is not an A2. An A2 is preferably deep and gives an entry near the low of the pullback. This is preferable since even a test of the high would mean a bigger payoff.

Shallow pullbacks such as b13 may be traded, but they should only be scalps. There is a very good chance that a shallow pullback entry's breakeven stop will be taken out except of course for soft and hard trends.

On the other hand, a G2 has relevance only in a very strong trend. An attempted sell-off gives a cheap entry for everyone who missed prior entries and they will rush to buy. If the trend is not strong, G2 cannot be taken on its own.


  1. How is "shallow" defined? Is it a 1-bar pullback, a two bar pullback, or is it the % of retracement?
    Of course, it all depends on the context, meaning that after a protracted move of 10 bars, a 3 bar pullback could qualify as "shallow". But, is there a clear rule?

  2. Can you please explain your entry and stop strategy with the W1P being so big? Thanks!

  3. Kostas, Shallow and deep are bit subjective and are related to the price action, slope of the trend and bar size. If the entry is about a bar away from the recent high, its shallow. If the entry is two or more bars away from the recent high, it could be deep. This is why a pullback to the ema is a good heuristic to determine a deep pullback.

    Eumaeus, I entered on the 3m

  4. Cadaver--
    I'm having trouble telling a 1pb from an OR from a 1rev in real time. For example, on 8/22 chart, what is suggesting that b4 is not a reversal as opposed to b9. b9 is at the ema whereas b4 is well above. thanks for any guidance.
    We're missing you in the chat room.

  5. JimJin,

    As I've noted in various places, 1Rev needs to be at a place where a reversal makes sense such as HOY, LOY, ema, etc.