A temporary reversal in the market (a security’s price) before it resumes its previous direction or overall trend. A retracement usually follows a rally or steep price decline, and thereafter trading resumes in the original direction. Given its short-lived nature, a retracement differs from full-swing reversals, especially that a market in a retracement will eventually return to its previous trend.

A retracement, as a temporary price reversal, occurs within a broader trend or extended market move.