There are many different patterns that can be used to identify potential reversals or continuation in the markets, but one of the most popular and reliable is the use of Fibonacci ratios. These ratios, which are derived from the Fibonacci sequence, have been found to be accurate in predicting market movements and as such, are widely used by traders around the world.The most commonly used Fibonacci ratios are 38.2%, 50% and 61.8%. These ratios can be applied to any time frame, but are most commonly used on longer-term charts such as daily or weekly. To apply these ratios, traders will first identify a swing high and low on the chart. The 38.2% retracement level is then calculated by taking the difference between the high and low and multiplying it by 0.382. This level is considered to be a key support or resistance level and if the market reverse off this level, it is often an indication that a larger move is about to take place.Similarly, the 50% and 61.8% levels are also important support and resistance levels that can be used to predict market movements. However, it should be noted that these levels are not always accurate and as such, should be used in conjunction with other technical indicators before making any trading decisions.
