Retracement

Filed Under » ,
Dictionary Says

Definition of 'Retracement'

A temporary reversal in the direction of a stock's price that goes against the prevailing trend. A retracement does not signify a change in the larger trend. On a chart where a stock's price is generally headed upward, retracements are the small dips in price that the stock experiences during its overall upward trend. Whether an investor identifies a change in a stock's direction as a retracement or a reversal will impact how he responds to it.
Retracement
Investopedia Says

Investopedia explains 'Retracement'

Technical analysts make an important distinction between retracements and reversals. Retracements are short-term changes within a longer-term trend, while reversals indicate the end of a larger trend and the beginning of a new trend. When a retracement first begins, it is difficult to tell whether it is a retracement or a reversal. Technical analysts try to distinguish between the two using Fibonacci retracements, pivot point support and resistance levels, and trendline support and resistance levels.

Related Definitions

  •

    Correction

    A reverse movement, usually negative, of at least 10% in a stock, bond, commodity or index. Corrections are generally temporary price declines, interrupting an uptrend in the market or ...
    Read More »

  • Trend

    The general direction of a market or of the price of an asset. Trends can vary in length from short, to intermediate, to long term. If you can identify a trend, it can be highly ...
    Read More »

  • Fibonacci Retracement

    A term used in technical analysis that refers to areas of support (price stops going lower) or resistance (price stops going higher). The Fibonacci retracement is the potential ...
    Read More »

    • Fifty Percent Principle

      A principle that predicts that, before the observed trend continues forward, a price correction of approximately 1/2 to 2/3 of the change in price will occur.
      Read More »

    • Reversal

      A change in the direction of a price trend. On a price chart, reversals undergo a recognizable change in the price structure. An uptrend, which is a series of higher highs and higher ...
      Read More »

    • Pullback

      A falling back of a price from its peak. This type of price movement might be seen as a brief reversal of the prevailing upward trend, signaling a slight pause in upward momentum.
      Read More »

    • Speed Resistance Lines

      A tool in technical analysis that is used for determining potential areas of support and resistance. This tool, consisting of three trendlines, is created by drawing the first trendline ...
      Read More »

    • Memory-Of-Price Strategy

      A trading strategy that assumes the support and resistance points of double tops and double bottoms exert an influence on future price action after they have been broken. The ...
      Read More »

    • Amplitude

      The difference in price from the midpoint of a trough to the midpoint of a peak of a security. Amplitude is positive when calculating a bullish retracement (when calculating from trough ...
      Read More »

    • Price Action

      The movement of a security's price. Price action is encompassed in technical and chart pattern analysis, which attempt to find order in the sometimes seemingly random movement of price. ...
      Read More »

Articles Of Interest

Sponsored links
Hot Definitions
Partner Links
Suggested Definitions