Trading
Retracement
A temporary reversal in price against the prevailing trend.
Full Definition
A retracement is a temporary price movement against the main trend direction. Retracements are normal in trending markets and offer opportunities to enter trades at better prices. Traders use Fibonacci levels (38.2%, 50%, 61.8%) to identify where retracements might end before the trend resumes.
Example
In an uptrend, price pulls back 50% of the recent rally before bouncing. This retracement provided a better long entry than buying at the top.
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