DEFINITION of 'Countermove'
The movement of a security's price against the current trend. A countermove occurs soon after the original trend and in the opposite direction, but by a lesser amount. Countermoves allow investors to try to "buy low, sell high," by taking advantage of the price retreating along the current trend to obtain a better entrance.
Also known as a retracement.
BREAKING DOWN 'Countermove'
Gains had by trading on countermoves are usually smaller because the full market swings are not recognized. Risk of loss is also high because traders often mistake a reversal for a countermove or retracement. For this reason, having a stop-loss in place is imperative.
For example, if the stock price moves up $15 and stays around the new level, it is just considered a move. But if the stock price moves up $15 then quickly moves down $11, it could be considered a countermove.