Forex glossary
Retracement
A retracement gives back part of an identified price move, often expressed as a percentage of its length. Fibonacci tools are optional. Whether it remains a correction rather than a reversal depends on subsequent structure and the chosen rules; depth alone does not guarantee trend resumption.
Illustrative example
How does it work in practice?
Assume a rise from 100 to 120 followed by a retreat to 112. Price gives back eight of twenty units, a 40% retracement; that percentage does not establish whether another high will follow.
A case to work through
Two different percentages
Hypothetically, start=80, end=100 and current=90.
- Price gives back 10 of 20 units, or 50% of the selected move.
- The decline from price=100 is instead 10%; the denominators answer different questions.
What follows? Name the percentage alongside its reference.
Example boundary: A flat start=end move has no valid denominator; depth is not an entry signal.
A useful distinction
Retracement / Pullback
Retracement measures the portion given back; pullback places a correction within an identified trend.
Change an assumption, see the result
What changes if…?
Check the portion given back after an upward or downward move. The denominator is the selected move's length; equal start and end values are invalid.
Retracement = (end − current price) ÷ (end − start) × 100%. The formula works for rising and falling moves. A negative value means continuation beyond the end; over 100% means passing the start. Selected anchors are assumptions, not a trading signal.
Check your understanding
Distinguish retracement depth from price return.
Show the answer and explanation
25%
(100−105)/(100−120)×100=25%.
From observations to price structure
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Read the fuller explanation
Related terms
Sources and documentation
- TradingView – Fibonacci retracements
Two-point anchors and percentage retracement levels; level calculations do not establish outcomes.
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