Why retracements happen
• It is not because of Fibonacci numbers, but because the speed at which the trend changes differs by timeframe
• The smaller the timeframe, the more often and quickly the trend changes, and small moves gather into large ones
What a retracement really is
• When the larger-timeframe (HTF) trend is up but the smaller timeframe (LTF) briefly turns down — if the larger trend is intact, this is a retracement (pullback)
• A chart moves in three structures: trend (expansion), convergence, and retracement
Where people slip
• They confuse a retracement with a trend reversal — the dividing line is 'has the larger-timeframe trend broken?'
• Looking only at the smaller timeframe is fooled by noise, and looking only at the larger one misses timing
A retracement is noise inside a larger trend. If the HTF is alive it is a pullback; if it is broken it is a reversal.
Can you tell whether your current position is a retracement of a larger trend or a trend reversal?