The concept of retracement

Trends advance like a staircase: a push, a breather, another push. The move in the trend's direction is called an impulse; the breather against it, a retracement or pullback. Recall the swing sequence of level 2 — every "higher low" in an uptrend is precisely where a retracement ended.

The natural question: how far does a pullback go? There is no certain answer, but there is a useful frame: measuring its depth as a PERCENTAGE of the prior impulse. A shallow retracement gives back a small share of the impulse and paints a strong trend; a deep one that surrenders most of the impulse raises questions about the trend's strength.

This frame gives you a measuring language, not a prediction machine. "Price gave back half the impulse" is an objective statement; "so it turns here" is not a statement but a scenario in need of testing. The next lesson adds the commonly used milestones to this measuring language.