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Percentage retracements

When the price moves following some trend, whether upward trend or downward trend, there is occasionally the price correction. During the correction, prices pull back to a certain level and then trend continues.

For example, if during the upward trend price jumps from level 100 to level 200 and then 50% correction occurs, price drops to 150, and then upward trend continues.

50% percentage retracement
50% percentage retracement

In strong trend percentage retracement usually takes value between 33% and 66% and in most cases 50%. This means that the correction will cause price movement of minimum one-third of the increase or decrease, depending on whether it applies to upward or downward trend. This information is very important for traders. Therefore, in an upward trend when correction occurs, trader can mark on chart portion of 33% - 50% as buying area.

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