Definition
Retracement is a prices reversal from the direction of the current price trend, occurring before prices continue in the original direction.
50%,75%, and 100% price retracement levels, and their multiples, offer the strongest levels of price support or resistance to further price movements.
Reactions at and from the 50% level, which Gann called the "Balancing point", should occur most often.
Prices retrace to Gann retracement levels, and then react.
Even if intraday prices exceed a Gann retracement level, prices generally will close within an acceptable retracement Zone.
In some cases, prices react al most to the exact midpoint of the daily price range.
The retracement concept is quite useful because that it tells us where prices might retrace and where a retracement action may be exhausted.
While you see the retracement, you should not be afraid.
The article is excerpted from "The W.D. GANN METHOD OF TRADING"