In theory, fib. Extreme retracement after 88.6 is not an important level. However, based on several case studies, the price oscillates around 88.6 to 100% Fib. Retracement very often before rejection or breakout moment.
88.6 Fib. the level represents the price level derived from the golden ratio (0.618 x 0.618=0.786, 0.786 x 0.786 = 0.886= 88.6%). Fibonacci Retracement Levels 88.6% and 78.6% can be important levels in some cases, so traders need to monitor these levels and check there are price reactions in this area. The best practice is to draw Fib. Retracements levels and Fibonacci expansion levels and analyze all price levels during the trading.
88.6% price level is derived by squaring (or multiplying by itself) from the Golden Ratio, 0.618:
0.618 x 0.618 = 0.786 (78.6%)
0.786 x 0.786 = 0.886 (88.6%)
0.886 x 0.886 = 0.941 (94.1%)
Learn more, in detail articles Fibonacci expansion levels.
Tips for Using the Minimum 88.6% Retracement with Fibonacci Pattern in Forex Trading
When you seek the Fibonacci trading, there are 3 main patterns:
1. The usage of multiple setbacks and extensions for identifying price levels in different Fibonacci levels that overlap for producing “clusters.”
2. The use of multiple indicators like MACD in different Fibonacci levels.
3. The use of Fibonacci levels as a part in a larger graphic pattern, like in the “head and shoulders” pattern.
Here, you would find information on a specific Fibonacci level focusing on trade and mostly in seclusion. It is a decline of 88.6%. This level was reached for summarization after using 0.618, the Golden Ratio, the square root, and the square to achieve 0886.
When it is exclaimed that it is achieved by making Fibonacci retracement, it means the retracement to 88.6% tells the range of the original characters. Therefore, if the starting step involved 100 pips up, retracing to 88.6, the grains will decline. The unique thing about Fibonacci levels is that they are not influenced by a specific time. They feature the same importance as wanted in a weekly long-term chart, or else they have a graphic instant five minutes.
The first price achieved high Point X 1.1967 on 8th March 2009. Then, it came down to .9909 on the Y-Point on 22nd November 2009. Therefore, the price came down to 2058 points in 37 weeks. The Z price point comes to 1.1730 on 30th May 2010, 28 weeks post Y point. When the figures and diagrams are examined, they were at 2 points, with the retracement level being 88.6%. This is unbelievable, as the price was up thousands of points for many weeks already, which is the precise matching with the main Fibonacci levels.
When this level is identified, you will find a spotless hit giving a trader over 1000 pips when the trader chooses to stay put once the price retracement ends Point-Z. This was accompanied by the long-term decline in USD / CHF, which can be experienced even today. Else, finding that an important Fibonacci level was clean and tested with success, an operator can make several trades in a short-span chart, even in 1 hour, seeking items for selling USD/CHF. Use a long-term plan while entering shorter-term time frames, keeping higher risk-reward ratios, and tight stop-loss in your trade.
One of the possible targets in your trades can be either the beginning of the retracement, expanding 100% of the starting movement, or Point Y, with the starting point being a little out of Point Y.
