The Fibonacci sequence is the sequence 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144...

Specialty of his sequence of numbers is that every next number is the sum of the proceeding two, 0, 1 (0+1), 2 (1+1), 3 (2+1), 5 (3+2), 8 (5+3), 13 (8+5) and so on.

"Fibonacci ratios" can be formed by comparing the relationship between each number, and each alternate number, and even each number to the one four places to the right, we arrive at some fairly consistent ratios. The important ones are 0.236, 0.50, 0.382, 0.618, 0.764, 1.382, 1.618, 2.618, 4.236, and for good measure we include 1.00.

Traders usually study charts by applying Fibonacci ratios to the Price scale and the time scale of charts in order to predict possible price retracements.

Prices never move in a straight line. Prices advance and retrace. Stocks, Futures, Forex, all instruments which are liquid, often retrace in Fibonacci proportions, and advance in Fibonacci proportions. Not always, and not precisely to the penny but this happens often enough that profitable trades can be done.

The price of any financial asset retraces a large portion of an original move to find support and resistance at the key Fibonacci levels before it continues in the original direction. These levels are created by drawing a trend line between two extreme points and then dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%.