RETRACEMENTS

RULES:
1. A retracement in an uptrend will NOT drop below the previous low. (i.e. it will be a higher low) A retracement in a downtrend will not rise above a previous high (i.e. it will be a lower high)

2. Retracements occur very commonly around even numbers x.00, x.50, etc.

A Gann retracement is specifically a 50% Fibonacci retracement. At this 50% zone, price can either resume its latest dominant trend or reverse the current trend. This was his best place to re-enter a trade in the dominant trend and placing a stop loss below the recent low.

Thus we need to talk about Fibonacci retracements. Fibonacci noticed a recurring theme in nature. The sequence is as follows: 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, etc. When extrapolated to the price of stocks, futures and forex, special attention is correlated to the 38.2%, 50%, 61.8% retracements.

Drawing proper Fib retracements is amust to accurately predict price targets.