What is Retracement?

A negative retracement is a reversal in the direction of a traded asset's price that goes against the previously prevailing trend. A retracement does not necessarily indicate a change in the larger trend as retracements are essentially small dips in an asset's price that, apart from other temporary retracements, is generally headed upwards. Whether an investor identifies a decrease in share price as a retracement or believes that it is a reversal will significantly impact how they respond to it.