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Trends & Market Structure

What Is a Retracement

A retracement is the price coming back along part of the last move, and it is measured as a share of that move — halfway back, two-thirds back — rather than in pips or dollars on their own. This paper shows you one drawn from gold's April 2025 in real daily candles, the idea as a yo-yo climbing part of its string, the move on the daily chart with its low, high and halfway line, the move as a ruler the pullback lows are read off, and the magnet setting that puts the ends of a move exactly on your platform.

Difficulty
Beginner
Reading time
5 min
Pages
8
Reviewed by
Saman Rahbar

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Up, then part of the way back

A retracement is the price coming back along part of the last move. Gold rose from 2956.38 on 7 April 2025 to 3499.96 on 22 April, a move of 544 dollars. Then it came back down along that move: to 3201.77 on 1 May, 55 percent of the way back, and to 3120.62 on 15 May, 70 percent. The retracement is not the 379 dollars; it is the share. The same fall after a move twice as big would be a retracement half as deep.

A yo-yo

The picture is a yo-yo. It drops the full length of the string, then climbs back up part of it. The drop is the move. The climb is the retracement, and it is described by how much of the string it has climbed: a third, half, two-thirds. On a chart the move is the last leg of the trend, and the retracement is the price coming back along it, said as a share of that leg. The word says the price is retracing its steps; the number says how many of them.

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