Fibonacci Retracement Levels

Fibonacci retracement

Fibonacci retracement is one of the most popular technical analysis tools. The tool is based on the mathematician Leonardo Fibonacci in the 13th Century discovered Fibonacci numbers and can be easily drawn on the chart with the most trading platforms.

The sequence is as follows:

0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144

Mathematicians have probably already recognized, the system behind it. A Fibonacci number is always the sum of the two preceding numbers (21 = 8 +13, 13 = 8 +5, etc.). It is also interesting that the one number divided by the next smaller always results in a value near 1.618. The larger the numbers, the closer this number is at the division. Subtracting that from 1, one obtains the first Fibonacci retracement level of 61.8 percent. The same thing happens when you next larger one divided by the number without an add or subtract 1.

If you divide a Fibonacci number by one, the two places is after her (8 / 21), leads to the second Fibonacci ratio of 38.2 percent.

If one makes the same with the number, the three digits to the right of her to get to the third ratio of 23.6 percent.

For uncertain reasons, the Fibonacci numbers play or rather the relations between them a real role in the Forex market and other markets. The Fibonacci numbers are also found in nature and the value of 1.618 is also known as the Golden Ratio or Golden degree.
As you can see on the attached chart, the most important Fibonacci Forex trading levels of 61.8 percent and has proven in the last case of the EURUSD. The price has barely risen above the Fibonacci Forex trading levels and then immediately has continued its downward trend. On the chart there is also the 50 percent retracement level, which results from any Fibonacci number, but in reality its validity has proved so often that it was included in the tool.

The construction of the horizontal lines is very simple. You simply take one high and one low on the chart and multiplying the vertical distance with the Fibonacci ratios (multiplied x 0.618). Most charting platforms do this automatically but as I said.

The Fibonacci retracement often act as support and resistance and a trader can thus provide meaningful price levels to buy or sell. As you can see on the chart of the euro in a sale which would have been subject to the 61.8 percent Fibonacci retracement extremely successful. We are currently more than 2000 pips in a new window View by definition lower.