Retracement

Market Terms

We don't know everything about the markets.  We're just devoted to learners.  Taken from those smarter than ourselves, here's how we define Retracement.

A minor pullback or change in the direction of a stock, index, or other financial instrument.  Retracements differ from reversals in the sense that once they are over, there should be a continuation of the previous trend.  Also, in a reversal, the price of a security needs to breach support or resistance levels.  Instead, a retracement is a short-term period of movement against a trend.  Of note, within technical analysis, a retracement must be taken within its own context and never in a vacuum.  If not used correctly, any potential analysis will be misguided.