Trading on a pullback (retracement)

[MT <mtzianos@xxxxxxxxx>]

Wyckoff said: "Don't trade the breakout, wait for the pullback instead"

Trading on pullbacks does indeed offer some advantages, although it does
reduce the overall expectancy of the system, based on my (certainly
non-exhaustive) testing with EOD intermediate-/long-term systems. There
are ideas on pullbacks in the literature, like Chande's Beyond TA and
also Chuck LeBeau's work.

Quote from BeyondTA: "Ideally, we would like to buy some rime during the
pullback, but we do not know how long the pullback will last. Hence, the
problem is how to specify that a pullback has occurred. During the
pullback, markets often also make new 5-day lows. Hence, we can define
this breakout and pullback long entry rule as follows: the market must
make a new 20-day high, and then define a 5-day low in the next 7 days"

In EL Chande's definition goes like this:

Input: Xdays (14);
If Highest Bar(High,20)[1] < 7 and Low < Lowest
(Low,5)[l] then buy tomorrow on the open:
If BarsSinceEntry - Xdays then exitlong at the close:

The first obvious improvement of Chande's example would be to buy on a
stop (letting the market inverse direction first and take us in). To
place a fixed arbitrary number of days to buy on a pullback (e.g. 5),
instead of using some conditions to verify the completion of the
pullback is like saying the market will always top or bottom after "n"
number of days, right?

So, what do people think of trading retracements ?

Regards, MT