Low Volume Pullback

AAA

DEFINITION of 'Low Volume Pullback'

A technical correction toward an area of support that occurs on lower-than-average volume. The low volume is a signal to traders that the trend is not reversing and that it is only the weak longs looking to lock in a quick profit. Frequent moves that occur in the opposite direction of a trend, which are accompanied by low volume, are normal fluctuations and generally deemed to be insignificant. On the other hand, a large spike in volume in the opposite direction of the trend could be used to signal that the smart money is starting to look for the exits and that the trend is getting ready to reverse.

INVESTOPEDIA EXPLAINS 'Low Volume Pullback'

Many technical traders will try to enter a position on the short-term weakness seen in a low volume pullback because it increases the risk/reward ratio as stop losses are closer to major support levels. It is common that large changes in volume will precede a price move. Traders will use indicators, such as the on-balance volume (OBV) to find situations where the trend and the volume are diverging.

RELATED TERMS
  1. On-Balance Volume (OBV)

    A momentum indicator that uses volume flow to predict changes ...
  2. Weak Longs

    Refers to the group of investors that holds a long position and ...
  3. Volume

    The number of shares or contracts traded in a security or an ...
  4. Pullback

    A falling back of a price from its peak. This type of price movement ...
  5. Divergence

    When the price of an asset and an indicator, index or other related ...
  6. Back-To-Back Deductible

    An insurance policy deductible that is the same as the coverage ...
Related Articles
  1. Active Trading Fundamentals

    Support And Resistance Basics

    Understanding the concept of Support and Resistance in trading can drastically improve your short-term investing strategy.
  2. Active Trading Fundamentals

    Using Volume Rate Of Change To Confirm Trends

    Wise traders rely on indicators that show a trend in volume, because without supportive volume, a price movement has no conviction.
  3. Technical Indicators

    On-Balance Volume: The Way To Smart Money

    This momentum indicator was designed to predict when major market moves would occur.
  4. Active Trading

    Tales From The Trenches: Volume Confirmed Broadening Pattern

    Find out how to make sense of this tricky - but profitable - formation.
  5. Active Trading

    Fundamental Analysis For Traders

    Find out how this method can be applied strategically to increase profit.
  6. Technical Indicators

    Trade This High Probability Bollinger Band Pattern

    Bollinger Band box patterns set up profitable opportunities when trends give way to well organized trading ranges.
  7. Options & Futures

    Avoid Future Shock By Protecting Your Portfolio With Futures

    Worried about protecting your portfolio of diversified stocks and assets? Using futures with correct strategies can help.
  8. Investing

    How Swaptions Can Reduce Risk in Portfolios

    How can investing in Swaptions reduce risk in portfolios.
  9. Trading Strategies

    Know How To Manage Gaps On Your Trading Strategy

    Gaps generate profitable strategies right after they print, as well as during retracements that test those levels, often months or years later.
  10. Investing Basics

    Understanding Risk Averse Investing

    Risk averse describes a low level of risk an investor is willing to accept on his investments. An investor who is risk averse prefers little risk and is willing to accept a lower return because ...

You May Also Like

Hot Definitions
  1. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  2. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  3. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  4. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  5. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  6. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
Trading Center