Valid Retracements Analysis

Learn to identify valid retracements in price action to pinpoint potential entry and exit points within a trend. This analysis helps understand market pullbacks

Published · Updated · Methodology: Price Action

Part of: Pullback & Retest

  • Methodology: Price Action
  • Content type: educational

Source video

Decoded from: COMO ANALIZAR RETROCESOS VALIDOS en TRADING en 2025 & 2026 by It's Smart Money — watch the original

Strategy overview

Pullback-and-retest trading rests on a single premise: after an impulsive move, price often retraces into a prior area before continuing, and entering on that return is cheaper and better-defined than chasing the impulse. What this entry is about is not the entry itself but the word in front of it — *valid*. Most losing pullback trades are not failures of execution; they are retracements that were never worth trading in the first place, or continuations that had already stopped being continuations.

That qualifying step is the entire subject of the source video, "COMO ANALIZAR RETROCESOS VALIDOS en TRADING en 2025 & 2026", from the channel It's Smart Money. The framing is diagnostic rather than prescriptive: instead of presenting one setup to copy, it is built around how to read a retracement and decide whether it qualifies — and the title's forward-dating to 2025 and 2026 signals criteria meant to be applied across changing conditions rather than a configuration tied to one market phase. Anyone building a filter like this ends up confronting the same questions: how deep a pullback can go before the premise is gone, whether the character of the retracement differs from the character of the impulse that preceded it, and what has to remain intact structurally for continuation to still be the base case.

No rule-by-rule breakdown has been extracted for this entry, so this page covers the concept and points to the source video rather than reproducing a mechanical checklist. If you are working from it, the practical task is turning "valid" from a judgment you make in the moment into a definition you can state before the candle forms — that is the difference between a filter and a preference.

Topics

valid retracements · price action · price action strategy · trading strategy · tradingview strategy · education · market analysis · pullback trading · trend analysis · swing trading

Frequently asked questions

What makes a retracement "valid"?

There is no universal definition — it is a filter each trader defines. In practice the criteria usually involve how deep the pullback goes relative to the impulse that produced it, whether the retracement moves in a corrective, overlapping way rather than an impulsive one, and whether the structural levels that justified the trend are still intact. Different methodologies draw those lines in different places.

What is the difference between a valid retracement and a trend reversal?

Functionally, that distinction is the whole reason the term exists. A retracement is a temporary counter-move inside a trend that is expected to resume; a reversal is the same price action that does not resume. Since both look identical while they are happening, validity criteria are an attempt to separate them early enough to act — which is why they are stated in advance rather than judged after the fact.

What does this page cover about the strategy?

This entry catalogs the concept and the source video — a Spanish-language breakdown from the channel It's Smart Money focused on analyzing retracements. Strategy Decoder has not extracted a rule-by-rule structure for this one, so the page describes the approach and its context rather than presenting a mechanical set of entry and exit conditions.

How do I turn retracement analysis into something testable?

Write the validity criteria down as conditions that can be evaluated without hindsight — measurable pullback depth, a defined structural level that must hold, a specific invalidation point — then replay or backtest them on historical data. A filter you can only apply while looking at a finished chart cannot be measured, and cannot tell you whether it adds anything over entering without it.

About this strategy page

This trading strategy was decoded by Strategy Decoder's AI from a public YouTube trading video and turned into a structured, reviewable specification. In the interactive app this page shows the full entry and exit logic, risk management settings, the indicators involved with their parameters, AlgoWizard-compatible logic and a Pine Script export ready for TradingView backtesting — plus an automated backtest verdict when one has been computed for this strategy.

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