Fibonacci: Application of theory to practice
Fibonacci ratios in the context of the currency market are applied to different levels of analysis, namely:
1. Discovered in the early patterns of alteration of directional price movements
2. Measuring the intensity of these alterations
3. Finding areas of operation
4. Points back from the market
5. Media and dynamic resistance
6. Help put a stop loss correctly
Therefore, let's see how these ratios have direct application as a tool of analysis, when determining rates of change as a rally opposite the main trend, and even favor.
Suppose a price rally of 100 points upward. At this level, we see a reversal pattern, indicated by other technical factors, and we need to know where it will return the price.
The first zone of return is 38.2% of the 100-point rally, that is, the area of 62 points. This item will be taken as at least probable reaction of the market.
If the price continues dropping, then the ratio will be near 50% rally.
This point is now interpreted as a minimum response, take it as support. Undoubtedly, the most likely ratio, once broken the 38.2% is 61.8% (do not forget the "golden shares"). This will be equivalent to the price reaches 32 points to the start of the rally 100 points.
When the price ratio for each, USD can see as a brake on the decline and this information must be strictly respected in its daily operations.
