Fibonacci Retracement And Projection Levels
In order to understand Fibonacci retracement levels, you should know something about the Fibonacci sequence. Fibonacci sequence is derived by adding the two proceeding numbers to find the next number in the sequence.
The fibonacci sequence was discovered many centuries back by an Italian mathematician. Over the centuries, it has been found that this sequence has many applications in nature. Fibonacci sequence is obtained by adding the two numbers in the sequence to find the next higher number. The first two numbers are 0 and 1. The next number is 1. This is the third number in the sequence. The fourth number will be 2. Fibonacci sequence looks like this 0,1,2,3,5,8,13,21,34,55.... and so on till infinity.
There is a very important ratio obtained by dividing the higher number with the lower one proceeding it in the sequence above. Divide 233 by 144, you get 1.618. This ratio is known as the golden mean and is very important. The inverse of this ratio is 0.618. Another ratio that is important is obtained by dividing any number in the sequence by two number higher. So divide 144 by 377, you obtain 0.381. Learn this powerful Fibonacci retracement method FREE that pulls 500+ pips per trade and discover the Fibonacci Killer Indicator. Meet Ron Carter-an EX Floor Trader with 28 years trading experience and discover his Pro Forex Robot that can make you rich. Download this 1 Minute Forex Trading System FREE!
We all know that markets are just people buying and selling. What the people believe, the markets believe too. In other words, people's emotions and sentiments have a lot to do with determining the behavior of the market. When people are bullish, markets are bullish and when the people are bearish, markets are bearish. Therefore, when majority of the traders use Fibonacci retracement levels in their trading, markets start believing in them!