What is a retracement in Forex?

Discussion in 'For novice traders' started by Francmorio, Sep 25, 2017.

  1. Francmorio

    Francmorio Member

    From the oxford dictionary, retracement means to trace again or back. That is the meaning following the dictionary definition, but in forex, it’s a bit expanded, other than the fact that it may sound analogous to a Keyline, retracement, considered independently could mean something slightly different, from the Investopedia, it means a temporary reversal in the direction of a stock's price that goes against the prevailing trend. Though a very important concept, rarely does a retracement signifies a change in the larger trend, in fact, most retracements connotes the continuation of the prevailing trend. Retracements is also known as the pullback, it’s the end of a retracement that becomes the key line. Again, that a retracement has ended at a certain price does not necessarily mean that’s the Keyline, every level that looks like a potential key line have to be evaluated properly and back tested before any conclusion is arrived at that, that is the Keyline. Understanding how to draw a Keyline very well will triple you profits, in fact just understanding how to draw Keyline’s, you’re 50% making it in forex.

    While the word Keyline sounds too difficult to clutch, it’s so simplistic yet not easy for some to grasp. Well, no one was born with it, takes persistence and incessant practice to grasp but once understood, it becomes part of you. Just like a learner driver graduating to professional driver, it will take you very little effort to locate a key line. Here is a tip on how to get the key line.

    In a downtrend, Keyline are the resistance lines that stop retracements from continuing in the direction opposite the overall bearish trend, In this case, you should look for green, or bullish inside bar, while price was breaking below the Keyline.

    In an uptrend, Keyline are the support lines that stop retracing from continuing in the direction opposite the overall bullish trend. In this case, you should look for red, or bearish inside bar, while price was breaking above the Keyline.
    [​IMG]
     
  2. andengireng

    andengireng Member

    For knowing retracement, traders usually using Fibonacci Retracement. A Fibonacci retracement is a term used in technical analysis that refers to areas of support and resistance the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%. Traders believe that price will bounce at these golden area.
     
  3. NewbieTrader

    NewbieTrader Member

    thanks a lot for this thread. This helps!
    there is no stop in learning, isn't it?! Every day you learn new things. I am still learning more and more even though i have been trading for almost two years :D
     
  4. Roman Rias

    Roman Rias Member

    Thanks for sharing this with us. I believe as a trader, it is must to have awareness about all these things. The more knowledge we will have, it will be easier for us to make money, so that is what we need to focus on in order to succeed.
     
  5. I can explain but I think it is not possible for anyone to understand like this especially newbies. There got to be proper step by step guidance because that is what will help with gaining. If we are serious then we can learn about this easily.
     
  6. ibm'73

    ibm'73 Active Member

    it's a great discussion, giving me a lot of extra knowledge for me personally
     
    Nia likes this.
  7. Tengkorakfx

    Tengkorakfx Active Member

    On paper, it looks really easy to detect a retracement. But in reality, you need several factors on where the price would retrace and continue its trend. You may want to use elliot wave on detecting impulse and retracement price movement...
     
  8. Francmorio

    Francmorio Member

    Retracements is an easy concept, the thing is, we need to learn that retarcements are just any movements that are against the opposite trend. That simple.
     
  9. andengireng

    andengireng Member

    Retracement sometimes trick me, when the indicator say the price will change the trend, I start to open position and then there is no retracement, that's why your money management is the best strategy. If your money management is bad, you can't survive.
     
  10. broforex

    broforex Member

    Between Reversal and Retracement, are two terms that are commonly found, but there are still many traders who are wrong and cannot even interpret them properly. Even if a trader can distinguish between Reversal and Retracement it is not impossible for a trader to easily make a profit from these two patterns.
     
  11. Tengkorakfx

    Tengkorakfx Active Member

    Based on my understanding, Reversal means that the price will break the current trend and change it. Retracement means that the price will back for a moment to look for a 'stepping stone' so that the price would going back to the main trend.
     
  12. broforex

    broforex Member

    In general, the strategy for entry or exit can be done in 3 ways, namely breakout when the market conditions are trending, bounce when the market is sideways and take advantage of when the price movement experiences a correction or retracement that usually occurs in trending market conditions. As is known in trending conditions it is usually always followed by a correction movement as seen in Elliot's wave pattern.
     
  13. Tengkorakfx

    Tengkorakfx Active Member

    On line chart, you can easily determine SnR levels and it's recommended to do so on higher timeframe (H4 and above). Then you can turn back on candle chart to see how price reacted to such levels...
     
  14. broforex

    broforex Member

    Because sometimes news will make price going to the opposite directions, it will make me loss and loss. So in my opinion, please manage your risk if a big news is coming. Not all your predictions become true and the movement is quite fast. But If news going to your direction, it will make you get a big profit.
     
  15. broforex

    broforex Member

    we can avoid losses due to incorrectly recognizing price movements, while optimizing profits when the movements are as expected. However, what if we have already opened the wrong position, for example a movement that is supposed to be a reversal is only a retracement? If so, there are two options: hold the position (hold) in the hope that the price will turn back again to be reversal; or close the position immediately after reaching the predetermined Stop Loss threshold.
     
  16. Tengkorakfx

    Tengkorakfx Active Member

    Losses are there on the market. It's better to find trading system that can rely on small losses with bigger profits in terms of ratio
     
  17. ljfbganhluda

    ljfbganhluda Active Member

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  18. ljfbganhluda

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  19. Tengkorakfx

    Tengkorakfx Active Member

    Retracement is an important moment to have while noticing a breakout on a trendline or a sideway area. You can trade based on a continuing trade with minimum risk
     
  20. broforex

    broforex Member

    Between Reversal and Retracement, are two terms that are often found, but there are still many traders who are wrong and can't even interpret both of them correctly. Even though if a trader can distinguish between Reversal and Retracement, it is not impossible that a trader can easily make a profit from these two patterns.
     

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