Analyze market sentiment to find the differences

The big difference between pullbacks and sideways is that they make retail traders believe in the direction of the market.

When the market seems to stop the trend and start to move sideways, traders will continue to enter the trend because they believe that the trend will continue.

When a pullback is formed, the trader will enter the order in the direction of the pullback (ie the opposite of the old trend). More or fewer orders are placed depending on the depth and depth of the pullback compared to the old trend. Specifically, if the pullback goes a bit deep, or the pullback is long but the price has not returned, the retail trader will start to close the current order, and place the order on the pullback.

Now, look at the AUDUSD pair illustration above. The price has gone through a downtrend.

Keep an eye on the end of the trend so that you can imagine how the retail traders trust the pullback.

Institutional traders took profit at the first blue zone, causing the price to push up from the downtrend, forming a pullback.

When the market makes a new bottom lower than the old one, the institutional traders take another profit, causing the price to be pushed up again. At this time, prices entered a sideways state, not a pullback anymore.

As the market moved further it began to realize that the pullback turned into a true reversal, not a sideways. So one lesson we can learn from this example is this: if a pullback is formed in a pullback, it is a sign of the formation of a new trend.

Back to the sideways problem, why are there sideways in this region? The reason is that when the pullback occurs (created by institutional traders), the retail traders still believe that the market only pulls back and takes advantage of the opportunity to enter SELL orders while pushing prices down. Thanks to those SELL orders, the big trader has an opportunity again to close his remaining SELL orders. And so the market went sideways there.

Three times like that (as shown above), small traders no longer see the downward force, some will get depressed and close their current orders, the rest don't enter sell orders anymore.

The end result, the small one is still the loser.

Another trap!

At this time the price is on an uptrend. The price moves up and forms the first pullback.

For now, retail traders believe this pullback is a reversal signal, not a pullback (perhaps because the lesson is still there).

Another reason is that this pullback is moving quite deep and long compared to the current uptrend (the current uptrend is quite short), so traders have reason to suspect this is not a pullback and leads to trend sentiment. will reverse. They place orders SELL. The bank traders took advantage of that opportunity and they placed a BUY order for the reciprocal and pushed the price to overcome the resistance.

When the price has increased too high, now everyone thinks it is appropriate to set BUY to follow the trend, then big traders continue to take advantage of that Buy force to close their Buy orders. The resulting price falls.

Retail traders who see the price drop to the market quickly close their Buy orders and cause the price to drop even more dramatically. When the SELL order reached its maximum, the price bounced up and formed a Pullback.

And the buying and selling cycle between big traders and small traders goes on. Small traders are constantly being used mentally, big traders wait for the opportunity to gather and discharge goods properly.

These behaviors cause pullbacks, sideways, and price trend reversals.

So what's the difference between Pullbacks and Sideways in the end?

Pullbacks and Sideways are two tools that Big boys use to give retail traders an expectation that the price will still follow the old trend and take advantage of that to take profits.

Only one fundamental difference is that a pullback is formed, if it is wide enough, it will fool ALL retail traders into a reversal and they will help Bigboys push the price in the new direction.

Sideways can't do that. The reason for this is because when the market is sideways, traders will place both Buy and Sell pending orders at the low peaks of the sideways as a safety measure. Therefore, the sideways slight fool is extremely difficult.