As a trend develops, the reactions, or pullbacks, tend to become smaller.
Traders looking to enter the trend wait for reactions to place their orders;
as the move becomes more obvious, these reactions will get smaller and the
increments of trend movement will become larger. When the reaction suddenly is
larger, the move is ending; the change in the character of the move signals a
prudent exit, even if prices continue erratically in the direction of the
trend.
--Perry J. Kaufman, from
Trading Systems and Methods, 3rd edition (1998,
John Wiley & Sons, New York).
