Target Ratio Projection

How to project potential pull back zones, using a simple FIB tool

Without getting into too much detail, price action is governed by geometry. Typically, any range on any timeframe that we can isolate, if price expands away from this range, the expansion typically exhausts at just about 100% expansion of the given range. In fact, you can take any chart and find a random range, then expand that by steps of 100% into either direction, and it will give you historical and future support and resistance levels with unprecedented accuracy.

Don’t believe me? Here is an example. I just took the SPY daily chart, zoomed out and randomly picked an imbalance, then drew a range around that and expanded that into both directions with 100% for each step.

If I pick another random imbalance, a smaller one this time, to offer some variation, nothing changes.

I can move it again. It doesn’t change anything. No matter where on the chart I place the measurement tool, each imbalance gives historical and future support and resistance with unprecedented accuracy.

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Deviation Averages

Clearly, target ratio projection works, and we can we can use a single imbalance to project them. However, studying the above charts it is obvious that price is sometimes a few points short, other times a few points over, and sometimes spot on to the penny.

Therefore we can say that the target is always the line, but price tends to ‘deviate’ from these targets, giving us the concept of “Deviation”. Deviation is also subject to rules and can be standardised to give us potential target zones when we are planning a trade.