Fibonnaci Retracements ( Fibonnaci )
The Fibonacci number sequence (1,2,3,5,8,13,21,34,55,89,...) is constructed by adding the first two numbers to arrive at the third. The ratio of any number to the next number is 61.8 percent, which is a popular Fibonacci retracement number.
The inverse of 61.8 percent is 38.2 percent, also used as a Fibonacci retracement number. It is the ratio of the Fibonacci sequence that is important and valuable, not the actual numbers in the sequence.
A Retracement is a decline that retraces a portion of a previous advance, or an advance that retraces a portion of a previous decline, is a retracement. Retracements typically cover 1/3 to 2/3 of the previous move, and a retracement of more than 2/3 typically signals a trend reversal.