The great mathematician in thirteenth century, Mr. Fibonacci, discovered the golden ratio to be 1.618, which is simply based on the pattern of many living things@in the natural phenomenon such as spreading the eddy of the snail and the growing leaves on the branch. As you can find, it is not completely ruled out that the market behavior should follow the natural definition because it is also operated by human beings. In fact, a unique ideaCso called, 1.618-technich, has been broadly used in London since 1950s. In addition, Mr. Rally Williams announced 1.28-technich which is just the root of 1.618. This method indicates the date of next coming top in the forex market, where the next top should come 1.28 times as long as the dates between the last proceeding two tops. Please look up the Fibonacci in detail using the google search box on the right head.
The Fibonacci retracement is much used in the forex trading. It is calculated using the highest and the lowest price in the forex market and it aims to find the target to rebound. You can easily calculate the relevant points. The Fibonacci retracement is set up at 38.2%, 50.0% and 61.8% of the market range, and those points are assumed to work as significant necklines in the forex market. The current market necessarily stays at any point between those retracement zones.
Most short term traders would look up into the highest and the lowest price on the previous day. They would calculate the relevant Fibonacci retracement. Go ahead to try to calculate those points in the forex market every day. You will find the forex market would frequently move in accordance with the Fibonacci retracement. Needless to say, the range breaking means the placement of the stop loss orders, and then, the Fibonacci retracement works like a neckline at any time in the forex market. Investigate yourself if the growth of the market process is relating to the figure, 1.618 or not.