Pullback or reversal: how do you tell the difference?

[Andrei Lukoianov]

Identifying a trend in hindsight is usually easy. The harder question is deciding in real time: is this a normal pullback or the beginning of a reversal?

⚖️ When developing trading algorithms, there is always a trade-off:

• An earlier signal lets you react sooner to a potential change in direction, but tends to produce more false signals.

• Additional confirmation helps filter out some false signals, but increases the delay. By the time you enter, price may have already completed a substantial part of the move.

💬 How do you handle this trade-off?

What conditions do you use to distinguish a pullback from a reversal? Do you rely on market structure, volatility thresholds, a higher timeframe, a candle close, or something else?

Which is more acceptable in your approach: several false signals or a later entry?

📈 If you have chart examples, please share them. It would be interesting to compare approaches and discuss the conditions in which they work — and where they fail.