Retracement

A counter move inside a larger one, described by how much of the earlier move it has undone. The measurement needs two points chosen by the reader, the start and the end of the prior swing, and the depth is then the distance given back divided by the size of that swing. Because both points are chosen, two readers measuring the same pull back from different swings will report different depths for it, and the arithmetic will be correct in both cases.

The proportions most often quoted come from the Fibonacci retracement convention, whose levels are drawn between the same two chosen points. Their standing is genuinely disputed. One camp holds that the proportions have no special property and are watched only because a large number of participants draw them, which would make them self referential rather than structural; the other holds that the ratios recur across markets in a way that chance does not explain. The evidence has not settled the argument, and the levels remain widely drawn either way.

The unavoidable problem is that a retracement and the start of a reversal are the same bars until one of them is over. The word contains a claim about the future, that the larger move resumes, and that claim can only be checked afterwards. In ordinary use retracement and pullback are treated as the same thing, with pullback slightly more common for shallow moves inside a trend, and neither term has a threshold that separates it from a decline that simply continued.