Same problem, sulong: "increase", "diminishing", "advancement", etc. However, you do mention S/R, which is another clue. Suggestion. Rather than get mired in generalities and out-of-focus maps, go back to the territory, i.e., the example I provided. That and what came before is all you have to work with. You don't know what happened thereafter. That's your universe. That's the reality. Start there. What in that example tells you "reversal" or "retracement"? Number the bars if you have to. But focus on the reality.
I don't want to get into a game of you're getting warmer you're getting colder. It just annoys everybody. Some of you are circling the issue of S/R without getting right to it, so let's leave volume on the table for now and move on. What does this tell you:
Db, I would like to understand how you're perceiving the chart and question you posed so here's my attempt: "A" is a retracement that tested Resistance. "B" shows Supply remains at that Resistance area (and/or Demand is weak at that level) so "B" is a continuation of a down trend. Volume hints the swing low before "A" *could* be significant and a reversal or congestion area might be in the making, but the trend is still down pending further information.
Thank you for the effort, FireWalker. Let me try again. How I perceive the chart is completely irrelevant. It doesn't matter. The purpose of this task if to determine tradeable definitions for "retracement" (or pullback or whatever) and "reversal" so that they may be distinguished and help the trader avoid taking the wrong side of the trade. So far, none of the definitions is tradeable. However, since the thread has attracted over 17, 000 views and over 80 people have viewed the chart, I'm hoping that there will be enough people interested in the job to do it. Granted, most people will just sit around waiting for somebody else to do it. However, a trading plan is an impossiblity unless the strategy and tactics are defined so precisely that the trader knows exactly what he is going to do when the market presents him with the opportunities he's looking for (and if he doesn't know what to look for, he isn't going to see it; if he doesn't see it, he isn't going to be able to take adavantage of it). This is not difficult. However, given the nature of the school systems the world over, most people are going to have no idea what I'm talking about. But for a trader not to know how to define a tactic is a calamity. Words like up, down, high, low, bounce, change, increase, decrease and so on are meaningless with regard to defining a tactic. When it comes time to hit the transmit key, one has to know exactly what he's looking FOR so that he can know just what it is he's looking AT. Otherwise, he's afraid to hit the key and doesn't do so. Or he hits it and exits the trade prematurely because he's not sure of it. Or he hits it for the wrong reason and learns the wrong lesson from whatever failure or success is the result. One of the reasons why so many beginners and not-so-beginners resort to indicators is that they don't want to or don't know how to think about what's in front of them. It's much easier to buy when the blue line crosses the red line. If the trade doesn't work out, change the setting. But this is no different from building a house while knowing nothing of whatever it is the house is sitting on. Once you guys come up with definitions, you aren't going to need me to tell you whether they are tradeable or not. You're going to know whether they are tradeable or not because (a) you're going to be able to communicate them to each other in a way that achieves mutual understanding and (b) you're going to be able to trade them. If you can't understand each other and you can't trade whatever definitions are offered, then you're not there yet. Even though this is not difficult, many people will find it impossible. They'd rather be told what to do. But that's their problem, not mine. Those who don't know what I'm talking about and are interested in finding out can study the previous thread. And by "study", I don't mean review or scan or look over. I mean read five or six or ten or twenty times. I mean go over the charts, bar by bar. I mean make it yours. Make it useable. Make it tradeable. Otherwise it's just feathers and rattles and old men's ramblings. The reality -- the territory -- is price and volume. Support, resistance, buying pressure, sellng pressure, trend are all expressed through price and volume. It's independent of you. It doesn't require anything of you. You don't have to decide what setting to use to determine the high and low of the day. Your task is to draw maps of that territory that are as near a perfect representation of it as possible so that you can make trading decisions which grow from it. The more artistic license you take, the more likely you will be wrong in your trade.
I assume that everybody saves chart examples of setups so that they have something to refer to. Those who are working on breakout and/or retracement strategies should save yesterday's and today's charts as an example of the importance of context. At the beginning of each day, price had about the same distance to go -- 25-30pts -- to the next level of R. Yesterday, price went the distance, and anyone playing breakouts or retracements had an easy time of it. Today? Not so easy, and price advanced about half of yesterday's range. Why? Part of the answer lies in base-buildling, i.e., preparation for the advance. Note that each of yesterday's two advances were preceded by a base-building period of at least two hours. There were no bases at all to speak of today. Do all bases result in spectacular advances? No, at least not on the same day. Are all spectacular advances preceded by bases? No. Sometimes short-covering is ignited and you're off to the races for no discernible reason (though when these take place at the open, price has generally been flat for an hour or so pre-market). However, if price bases all morning, it may not be a bad idea to stick around for lunch. If price advances in the morning and bases for several hours into early afternoon, it may not be a bad idea to return for a possible afternoon trade. Bases collect and store energy, and all that energy has to go somewhere. Be there with a plan when it's released.
And while you're at it, do you play this as a retracement in an uptrend, or as a lower high after a reversal?
Still don't understand what db is going for, but it sounds like tactics so for his last chart: The break of the up trend line says the trend has changed. No signs of reversal yet and it might be basing in a longer term up trend. If you're long, stop should be the recent swing low. If you're flat, you might short a break of that low or wait for a breakout of the high to go long. Otherwise you're sitting still or scalping the range.
More than a half-dozen people have tackled this question (out of more than a hundred), yet they don't agree. One likely reason for this is that they don't agree on what the difference is between a reversal and a retracement. And the most likely reason for that is that none of them has defined for himself -- or herself -- what is the difference between a reversal and a retracement. And unless one defines the difference between a reversal and a retracement, there's no way he's going to be able to develop a plan which profits from one or the other or both. Anyone who is waiting around for me to supply the definitions is going to be disappointed because there is no single definition for either a retracement, a reversal, or a breakout. The trader must decide for himself what those distinctions are. Why? So he can develop plans for trading them. So far, however, no one has demonstrated that he or she has defined any of this specifically enough to trade it, much less to explain it to someone else. Anybody who backtests via computer, of course, has to be specific so that the computer can understand them (whether or not they're asking the right questions is another matter). Many if not most of those who don't backtest via computer think that they're off the hook in this regard and can just "feel" their way through the trades. This is a lot of crap. If you can't define a reversal, then you don't know what a reversal is. If you don't know what it is, you can't trade it, unless of course your strategy consists of "winging it". Ditto breakouts and retracements. Support, resistance. Demand, supply. Trend, trendlessness.
IMO retracement in uptrend and early stages of reversal is like identical twins where their own parents might have difficulties to distinguish between them. Appearance of marubozu on increasing volume (2000-4000) with penetration of demand line A-A would confirm trend reversal and initiation of short position. Do I going in the right direction DB?