Retracement is a temporary reversal in the market’s direction (i.e., the direction taken by 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.

Reversal (trend reversal) is a change in the direction of a market that goes beyond a normal correction point. In other words, it lasts for longer periods where the prices of stocks or other securities move in an opposite direction and continue in the new direction for extended periods.

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