What is a retracement in forex?

Solution
A retracement is when a currency pair reverses its direction and moves in the opposite direction of a previous trend.

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Forex pairs usually move in trends or sideways. That is, sometimes, buyers or sellers prevail, and the market is predominantly one-sided and moves in one direction. In such a case, the market is moving in a trend.

Despite this, markets hardly move in a straight line. They usually move in zigzag shapes or waves. Thus, even in an uptrend, you see some downwards pull back movements. This happens because even if the buyers are prevailing, there will be some sellers from time to time, and people have different convictions about where the...
Retracements and reversals, along with expansion and consolidation, are separate elements of price action.

A retracement is a price movement back into the current price range. Also called a pullback as mentioned above. For bullish moves (higher-highs, higher-lows, etc.) the retracement is that price leg that goes back to the source of the recent/previous higher high before bouncing and heading back in the direction of the newly established trend.


A Reversal is a change in trend and can be found, using the example of moving from bullish to bearish price action. This can be seen after price makes a higher high and moves away price fails to take out the recent/prominent higher high and proceeds to fall below the last higher low.

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When the price changes its direction from the existent trend, it is called retracement. Usually, the price moves slower during retracement than a trend. Traders usually wait for the price to complete its retracement at a significant level of support/resistance to take entries. However, it is often seen that the price makes a breakout and makes a new trend while it is having retracement.
 
Retracements are generally seen in larger trends, a very basic and most popular tool for finding the retracements is Fibonacci that I use often when trends has formed second higher low in uptrend and second lower low in downtrend.
 
a retracement is when a trend reverses and moves in the opposite direction for a short preriod before the trend continues. Some people refer to it as price correction
 
You have explained it very nicely. Retracement or Pullback is often called price correction as well. If the price produces a reversal at a significant level during a retracement, traders look to take entries. This is called ABC pattern trading, which is one of the most prolific trading strategies as far as I am concerned.
 
A retracement in forex is a temporary reversal or pullback in the price within an established trend. It allows traders to identify potential entry points and manage risk effectively.
 
A retracement, my friend, happens when a currency pair decides to switch gears and head the other way from its previous trend. It's like a moment of pause before it potentially gets back on track with its original direction. Retracements, you know, they're quite usual in the big picture of things, and us traders often use them to spot possible entry points or handle our positions smartly.
 
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