After a particular maket move, prices retrace a portion of previous trend before resuming to move in the original direction.
These counter trend moves / corrections tend to fall in certain predictable precentage parameter. The best knows - 50 % RETRACEMENT.
Besides 50% retracement, there are also 1/3 and 2/3 retracements.
This chart is current uptrend of BTC (Aug 21, 2021 ) expects about 50% retracement. As per the retracement lines the price should come down to about ~46,500 USD (AF=FD) before moving up and crossing 50K
If a trader is looking for a buying area under the market, he can just compute 33–50% zone on the chart and use that price zone as a general frame of reference for buying opportunities
The maximum retracement parameter is 66%, which becomes an especially critical area. In above example if the uptrend is to be main-tained, the correction must stop at the two-thirds point ~ 45750 USD.
Again If the prices move beyond the two-thirds point, the odds then favor a trend reversal rather than just a retracement. The move usually then retraces the entire 100% of the prior trend.
These counter trend moves / corrections tend to fall in certain predictable precentage parameter. The best knows - 50 % RETRACEMENT.
Besides 50% retracement, there are also 1/3 and 2/3 retracements.
This chart is current uptrend of BTC (Aug 21, 2021 ) expects about 50% retracement. As per the retracement lines the price should come down to about ~46,500 USD (AF=FD) before moving up and crossing 50K
If a trader is looking for a buying area under the market, he can just compute 33–50% zone on the chart and use that price zone as a general frame of reference for buying opportunities
The maximum retracement parameter is 66%, which becomes an especially critical area. In above example if the uptrend is to be main-tained, the correction must stop at the two-thirds point ~ 45750 USD.
Again If the prices move beyond the two-thirds point, the odds then favor a trend reversal rather than just a retracement. The move usually then retraces the entire 100% of the prior trend.