Fibonacci Retracement

In most cases though, the price moves in zigzag shapes. Some traders call it waves, and there is a scientific concept called Elliott wave theory. But for us it is important to know the nature of these moves. First, we need to identify a swing move that is a move from point A to point B. We know already that after the main swing there should be a correction in the opposite direction to point C. When we see a move from point A to B, we wait for a move down (correction) to point C. Point C should be located between points A and B. The commonly use retracement levels are 38.2%, 50.0%, 61.8%, 78.6% and 88.6%.

How to draw the Fibonacci Retracement? 

In www.investagrams.com, see the picture below. Drag the Retracement from point A to point B.

On a chart illustrating an uptrend it may look like this: 

It is not always so easy to identify points A, B, and C, but it gets easier with time and experience. When we are sure that we have found the ABC move, we can draw a Fibonacci retracement tool from investagrams. We start from the low of swing to the high, so from point A to point B.

On a chart illustrating an downtrend it may look like this: 

We start from the high of swing to the low, so from point A to point B.