Ratios of these numbers to each other give us important values: 62%, 50% and 38%. The prevalence of these ratios can be found all around us - from the double helix of DNA to spiral galaxies! The pioneering work of traders like W.D. Gann and R.N Elliott also showed that these ratios are prevalent in the financial markets. While there are many uses for these ratios in technical analysis, we are going to concentrate today on Fibonacci Retracement Levels.

Many technicians have noted that markets tend to reverse or consolidate once they reach one of these ratio levels (measured from the distance of the previous trends reversal). They can used as entry levels, exit levels and even as a money management tool (as in OmniTrader's Eighth Tool).

To identify Fibonacci Retracement Levels, you must first identify the latest peak and valley in the securities chart. Once this is done, you can measure 3/8ths, 4/8ths and 5/8ths of the distance from valley to peak (or vice versa if you are looking at a short position). In OmniTrader, there two tools that help you do this. The Fibonacci Retracement Tool will try and identify the latest peaks and valleys and then show you where these important levels are located. The Eight's Tool in OmniTrader allows you to draw across the latest peaks and valleys yourself and then see how that trend divides into eighths.