Retracement Levels

Categories: Strategies, Technical Analysis, Investing and Trading,

These are percentage values that are used to predict the length of price corrections in a trending market (either up or down). The most common trends levels used are 23.6%, 38.3%, 50% and 61.8%. These levels are created by drawing a trendlinetrend line between the highest and lowest points (0% and 100%), and then dividing the vertical distance by the retracement levels. They are used to help identify strategic placements for transactions to target certain prices, or stop losses. The theory being that significant price movements up or down will be at, or near these levels. Also called fibonacci retracements.