Retracement: meaning, definitions and examples

Etymology

• The term comes from the late Latin 'retrahere', meaning 'to draw back'.
• In financial contexts, it has been used since the late 20th century to describe market behavior.
• The prefix 're-' implies backward movement, while 'tracement' relates to tracing or marking.

Finance

• Traders often use Fibonacci retracement levels to predict potential reversal points in a market.
• A retracement is different from a trend reversal; it is typically a short-term move against the prevailing trend.
• Understanding retracement patterns can help investors make more informed decisions about buying or selling.

Psychology

• When people make decisions, they may experience emotional 'retracements' after losses, reevaluating their strategies.
• The concept highlights our natural tendency to backtrack and reassess before making significant changes.
• This act of taking a step back can prevent impulsive decisions and foster deeper analysis.

Art

• In art, a 'retracement' can be seen as artists going back to earlier techniques before developing new styles.
• An artist might create a piece, step back to critique it, and then incorporate learned lessons into the next work.
• Many famous movements often show artists briefly returning to foundational techniques before innovating.

Technology

• In software development, a 'retracement' might occur when a product team revisits past features to improve or fix them.
• Agile methodologies often require teams to backtrack and reassess their progress during development sprints.
• Data analysis uses retracement to reevaluate strategies based on performance trends, enhancing future efforts.