Fibonacci retracement

Fibonacci retracement

Fibonacci is a set of number sequence generated by adding up two numbers occuring in a number series for eg number series = 1 2 3 4 5
fibo series 1 1 3 5 8 13 etc

similarly stock also show a similar approach when point A goes to point B there is always a pressure of correction or retracement, how much will these retracement go there are three critical points 38.2%or original 50% and 61.x % as shown in the figure, so first resistance occurs at 38% and if it passes that 50% is next catch and thirdly 61.8 levels.

Next obvious question arises is how are we getting the percentages.... 3/5 ,5/8, 8/13 all generate a number around 0.618x

 .382 = .618 squared 

  .500 = 1 ÷ 2, the second and third numbers in the series 

  .786 = square root of .618 

1.000 = 1.618 x .618 

1.272 = square root of 1.618 

2.618 = 1.618 squared

I am posting a video which describes in detail the workings of Fibo nacci retracement

Also go to Afraidtotrade.com where corey rosenbloom has posted some cool retracement scenarios... India's NIFTY  



ref: swing-trade-stock.com




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