Forex traders use Fibonacci retracements frequently when buying low and selling high. There is often a dip in the market after a big surge higher – if you can guess that price level correctly, you have a good chance of catching some upturns as it returns towards the original base level before it broke out higher.<\/span><\/p>\n

To figure out how much upturn we should expect, we take the highest point reached during the rally and go backwards using Fibonacci ratios of 61.8%, 50% and 38%. You should expect to make around half of your potential profit if you buy at the level where the price action returns towards the starting point before continuing higher.<\/span><\/p>\n

You can also guess that there will be a strong surge lower after an uptrend has been broken by looking for retracements off the swing highs. This method is not quite as popular as figuring out which way to trade after an uptrend break because it considers selling demand rather than buying demand. It’s still helpful to know how these levels work so you have more information about what might happen next in a market move.<\/span><\/p>\n