The 61.8% is the most important Fibonacci ratio in the sense that out of all the ratios out there this one is considered to be the golden ratio. The reason for that is the fact that almost everything is moving around this ratio and markets participants want to know what to expect when price is relating one way or another with that ratio.
The recordings that are coming with this educational series show the multitude of possibilities one has in using the 61.8% retracement level when trading.
First of all, the 61.8% is the are to look for when hunting the third wave in a five waves structure for an impulsive move. That third wave is the one everybody is looking for and they just wait for price to retrace into the 50-61.8% retracement area before deciding to buy an options. This is just one possibility to trade using the 61.8% ratio as according to Elliott waves that is the place to look for the beginning of a strong move.
The second way to use the golden ratio is by analyzing possible corrective structures and the golden ratio allows one to make the difference between a zigzag and a flat, and this is important as one has a 5-3-5 structure and the other one a 3-3-5 structure.
The difference between the two is made by measuring the length of the first corrective wave and looking at the end of the second corrective wave, the b wave, to see if it is closing below or above the 61.8% level. If it is below, then the structure is a zigzag. If it is above, then the structure is a flat and we should look for different thing based on that.
And the third way to use the 61.8% ratio is to apply it in order to find potential end of impulsive moves being part of zigzags, basically the c waves.
This is happening because zigzags allow you to look at the length of the first wave, wave a, and to project it in order to find out the end of the next c wave. The 61.8% ratio makes the difference between a truncated zigzag and a normal one and usually price is reacting strongly at that area giving the trader the possibility to make use of the golden ratio.
More examples are to be found on the recording that are coming with this project and the ones explained above are treated in more depth there so make sure you are watching them.
Next project will show you how to trade the thrust of a triangle.