Pullback

Pullback refers to a decline in a security’s price after experiencing some appreciation in a relatively short period of time.

Some traders like to sell a security that has gone up in price, hoping to buy on the pullback.  Jesse Livermore and many other traders believe this is the wrong way to trade, as a pullback may not happen for a long time if a security is in a strong trend.

Some traders buy a security in a strong trend, and add to their position in a pullback.

Buying the pullback may also be dangerous in the late stages of a bull market. Since most market participants are expecting a bull market and ever higher prices, they buy on a pullback, thinking they are getting a bargain, when in fact this may be the beginning of a bear market.