In a general sense, Triax is correct that each trader must define them for himself, though not necessarily for the reasons he gave. Other reasons include the fact that many traders just don't want to think about it because thinking about it would mean defining it, and once one has defined a setup, he has more trouble evading responsiblity for the trade, and many traders will go to any lengths to avoid responsibility for the trade. However, it is absolutely essential that one distinguish between retracements and reversals if for no other reason than doing so will enable him to avoid trading counter-trend (given the general quiet on the ET board over the last few days, one can be fairly certain that a great many people bought Tuesday all the way down and sold yesterday all the way up). Perhaps if you review the post I made to you on this subject several days ago, it will make more sense now. I've also addressed this subject in the PV
racticum pdf at my Yahoo site.
I should also point out that while trading via price action may be the simplest course, it is not the easiest. Trading via patterns and indicators seems to be easier since all one has to do is buy when the green line crosses the red line and sell vice-versa, or buy or sell the pattern once one has recognized it. However, this ease doesn't manifest itself in practice, and one can spend at least as much time searching for that elusive indicator or setting that will enable all the pieces to fall into place as he would studying price and understanding why traders do what they do at the points or levels at which they do it. Given the appearance of ease, it is only natural that beginners would turn first to indicators and patterns, and it should come as no surprise that disappointments drive beginners to price later on. Perhaps if I were to re-open those threads and ask the same questions about retracements and reversals, there would be more people willing to puzzle out the answers. But since you and sulong are the only two people I know of who are making a concerted effort in this direction, I doubt it. And the PV
racticum is done now, so I'm not yet motivated to begin again with a thread, particularly since you two are doing just fine.
As for backtesting via computer, I can't see that it would help much. In fact, I can't see that it would help at all. None of this work is going to do you any good whatsoever unless it enables you to detect a shift in buying/selling pressure in real time, and the only way you're going to be able to do that is by poring over old charts and finding those "inflection points" by hand, studying what happens before and what happens after, bar by bar. A computer won't do that for you.
The principles are few, but in order to apply them, you must forget a lot of what you think you know, which is why it's easier for a beginner to do this than a "pro" whose head is full of false facts about the way things work. As I said, while this is simple, it is in no way easy. But as long as you can put faces to the movements you see, you shouldn't have any insurmountable difficulties.
