In the Fibonacci sequence of numbers, each number is the sum of the previous two numbers, starting with 0 and 1. That way the sequence starts with 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144 etc.
The higher up in the sequence, the closer two consecutive fibonacci numbers of the sequence divided by each other will approach the golden ratio which is approx 1 : 1.618.
The golden ratio rule is widely spread in almost everything in our world and represent harmony and beauty. Even egyptian pyramids were built using this, sometimes called "Divine proportion". Some people claims that even human body and face consist of it. Although, the golden ratio have its supporters and detractors.
In forex these ratio represented by 23.6%, 38.2%, 50%, 61.8% and 100%, 161.8, 261.8%. You should find Fibonacci indicator in your forex software. It can be used for calculating the following impulsive or corrective wave size. The sizes 23.6-100% are used to calculate the corrective wave and 100-261.8% the impulsive wave. These waves always take turns and also the size of next wave always differs. There can't be 2 continuous 23.6% corrective waves or 161.8% impulsive ones.
For example in spring 2010 we could see a correction of impulsive wave on ~ 61.8% . The most important levels are 61.8 % and 38.2% and the other ones are additional.
As we can see 61.8% level made a strong resistance to the rate. You should consider fibonacci levels as additional support/resistance level in trading on forex.
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