Candle chart with percent drawdown level

Usually, the market will not rise straight, nor fall vertically, but in two steps, step back. Before the current trend continues, the market will usually first have to make a certain degree of drawdown on the process of progress or decline that has been formed. In this kind of retracement level, the more commonly used is 50% retracement level, and the Fibonacci retracement level of 38% and 62%.

The Fibonacci sequence refers to a sequence of 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233,377,610,987,1597,2584,4181,6765,10946,17711,28657,46368 ( This sequence starts with the third item and each item is equal to the sum of the first two items.

　　It is interesting to note that this is an entirely natural number sequence, and the formula is expressed in irrational numbers. And when n tends to infinity, the ratio of the previous item to the latter becomes more and more close to the Golden Section 0.618. (or the latter is more and more close to the ratio of the previous one, the fractional part becomes more and more close to the Golden segment 0.618, the ratio of the previous to the latter is getting closer to the Golden segment 0.618)1÷1= 1,1÷2=0.5,2÷3=0.666...,3÷5=0.6,5÷8=0.625,............,55÷89=0.617977, ..., ....... 144÷233=0.618025 ... 46368÷75025=0.6180339886 ...

In this set of ratios, it consists of 61.8% (or its reciprocal 1.618) and 38.2% (or its reciprocal 2.618). This is the reason why the 62% (61.8% rounding) retracement levels and 38% (38.2% rounding) retracement levels have been widely circulated. Here is the calculation method: 6.5-(6.5-5.2) * ratio = predictive value (5.5)

Candle chart with percent drawdown level