It means to stay in the purple circle.
While playing as a gunslinger I also had some problems for the first ten deaths on the story mode difficulty. I already managed to read all those comments about people having difficulties who probably just suck at this game (cheers to all the guys sharing hate in this topic). I managed to defeat the spirit by just using two skills - vital shot and sweeping gunfire, and it took my only a couple of minutes. I started at one side of the isle, punched the vital shot and sweeping gunfire until her spirit got 30 stacks, collected the healing in the meantime and run to the other side. When she came back I did the same thing, stacked her fast, took the healing etc.
That's no rocket science but I managed to stack her fast enough not to let her punch me too much. I had to interrupt her once or twice, and just enough to have the cooldown for escape gone. Just remember to give her some additional sweeping time when she gets stunned.
Casual players ftw!