88.6% Fib Bounce Before 150 Pip Move

My favourite Fibonacci level is 88.6% and it is something I have written about on DailyForex many times before. To recap, the 88.6% level is derived from taking the Fibonacci Golden Ratio, 61.8% (or 0.618), square rooting it and then square rooting it again. This gives you 0.886 or 88.6%.

When the price retraces to a Fibonacci level, all that means is that the size of the retracement as a percentage is equal to a Fibonacci percentage. For example, if the price makes a low, then moves 100 pips up to make a high, then moves back down 88.6 pips before moving back up in the original direction, then it has retraced 88.6%.

When I am using other Fib retracements levels, such as 61.8% or 38.2%, I often want to see a confluence of other factors such as a chart pattern, previous support/resistance etc. But with the 88.6% level, if I see price bounce cleanly off it and move away, I can often take a trade on that alone especially if it is in line with the larger trend. I have found it to be a very accurate predictor of price movement.