Understanding The Term Fibonacci Retracement.

Fibonacci retracements are percentage values which can be used to predict the length of corrections in a trending market. Most popular retracement levels used for the forex trading are 38.2%, 50%, and 61.8%. In a strong trend you can expect the currency prices to retrace a minimum of 38.2 percent; in a weaker trend corrections may go as far as 61.8 percent. The 50 % is the most widely monitored retracement level and is a common area to buy in the up trends or sell in the down trends. If a correction exceeds one of the retracement levels - look for it to go to the next (e.g. to 50% after the 38.2% level or to 61.8% after the 50% level). Whenever the prices retrace more than 61.8% of the previous move (on a closing basis) you can expect them to return all the way back to the beginning of the trend.