12. Corrections in Perspective

Most practitioners of technical analysis will agree that no market moves in one direction forever. After a rally or decline, the market will pause as winners take profits, losers cut their losses, and the second round of positioning takes place. Terms like correction, consolidation, and retracement are fairly interchangeable, although some would argue that the shape of the pattern created distinguishes them. In most applications, a correction takes place after a significant change in accepted market value. The correction shape and size are intimately related to the move being corrected.

The good technical analyst will look at different indicators in different time periods. However, we all become comfortable ...

Get Technical Analysis Plain and Simple: Charting the Markets in Your Language, Third Edition now with O’Reilly online learning.

O’Reilly members experience live online training, plus books, videos, and digital content from 200+ publishers.