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Forex trading is full of trading systems that are based on special numbers. Fibonacci numbers, prime numbers, trigonometric relationships, etc are all abundant in forex trading systems. It will then come as no surprise that the 50% number holds a special spot in the minds of many forex traders.

The 50% retracement principle states that if the second Fibonacci wave retraces the first one by exactly 50%, then the height of the third Fibonacci wave will be approximately equal to the height of the first wave. It's worth noting that the 50% principle is not a proven theory but rather just a principle.

Empirical studies by Archer and Bickford have showed that the 50% principle does not occur with a reasonable degree of confidence in forex markets. However, the principle was originally designed to apply to stock prices more than a century ago.

Archer and Bickford go on onto analyzing what percentage the first and third waves represent in relation to the second Fibonacci wave. In this forex trading analysis, the researches use 3 to 15 boxes as reversal amounts in the swing algorithm on EURUSD.

Other types of reversal charts you can use when forex trading are geometric charts. This type of chart displays the same information as a standard P&F chart expect for that fact that the columns of Xs and Os are converted to vertical columns with connecting horizontal lines and the reversal crosses. Some in the forex trading community argue that the advantage of geometric charts is that they are a neater representation of the trading data, while some others argue that the advantage of a P&F chart is that its components can easily be counted.

Another type f reversal chart useful in forex trading is the pivot chart. This type of chart is unique in its kind is so far that it does not require any user input parameters. The chart only used the highs and the lows for the relevant time period and hence it is not necessary to convert OHLC data into a series of daily closes-only data.

The underlying assumption in a pivot chart is that once a trend is in place the pivot algorithm favours the continuation of the trend. A trend reversal can only occur when a continuation increment does not take place.

There are a number of different of reversal charts belonging to the 50% rule you can use in your forex trading activities. The more you educate yourself on many of the free website, the higher your chances of reaping the generous rewards forex trading offers.

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The Rover North Forex System Little History: http://forex-trade-systems.blogspot.com/2011/02/rover-north-forex-system-little-history.html