Glossary · Trading basics

Pullback

A temporary move against the prevailing trend before the trend resumes, such as a dip inside an uptrend.

By Sky Trade editorial teamUpdated November 5, 2026

A pullback (or retracement) is the market catching its breath. In an uptrend price rises, dips part of the way back, then rises again; that dip is the pullback. Many traders prefer to enter during pullbacks rather than after big candles, because the entry sits closer to a level that, if broken, shows the idea was wrong.

The hard part is that a pullback and a reversal look identical while they are happening. You only know which it was afterwards. Tools that help frame the question include previous swing levels, moving averages and Fibonacci retracement levels such as 38.2% or 61.8%. None of them tells you in advance which level will hold.

A practical rule many traders use: a pullback that breaks the last higher low of an uptrend is no longer just a pullback, because the structure has changed.

For Higher/Lower trades timing matters a lot. Entering Higher at the very start of a pullback can mean the price keeps sliding past your expiry even if the uptrend later resumes. More in the Fibonacci retracement guide.

Example

GBP/USD rallies from 1.2600 to 1.2680, dips to 1.2650 — a 37.5% retracement of the 80-pip move — and then climbs to 1.2700.

Learn more in the academy

Fibonacci retracement: how to draw it and why traders watch it
How to draw Fibonacci retracement from swing to swing, what the 23.6, 38.2, 50, 61.8 and 78.6% levels mean, why they sometimes work, and common pitfalls.

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