Fibonacci Retracement

Fibonacci Retracement is a popular technical analysis tool used by traders to identify potential support and resistance levels based on the Fibonacci sequence. This tool helps traders predict areas where prices may reverse or stall during a pullback or correction in a trend.

Overview of Fibonacci Retracement

Fibonacci retracement levels are horizontal lines that indicate potential reversal levels based on the Fibonacci ratios (23.6%, 38.2%, 50%, 61.8%, and 100%). These levels are drawn between a significant price high and low, providing insights into possible price movements.

Key Components of Fibonacci Retracement

1. Fibonacci Levels: The primary Fibonacci retracement levels used in trading include:

   • 23.6%: Minor support/resistance level.
   • 38.2%: Indicates a potential reversal.
   • 50%: Psychological level, often seen as a significant area of support or resistance.
   • 61.8%: Key Fibonacci level, often indicates strong reversal potential.
   • 100%: The full retracement level back to the starting point.

2. Price Movements: Fibonacci retracement levels are used to assess the likelihood of price movements following a trend, identifying potential entry and exit points.

Steps to Use Fibonacci Retracement

1. Open the Platform:

   • Log in to your account.
   • Load the chart for the asset you want to analyze by entering the ticker symbol.

2. Select Chart Type and Timeframe:

   • Ensure your chart is set to Candlestick or another suitable type for clear visualization.
   • Choose an appropriate timeframe (e.g., daily, weekly) that aligns with your trading strategy.

3. Access the Drawing Tools:

   • Click on the Drawing Tools panel in the chart interface.
   • Locate the section that includes Fibonacci tools.

4. Select the Fibonacci Retracement Tool:

   • Find the Fibonacci Retracement tool within the drawing tools section.
   • Select this tool to begin plotting the retracement levels on your chart.

5. Drawing Fibonacci Retracement:

   • Click at the significant price low to establish the starting point of the retracement.
   • Drag the cursor to the significant price high to set the endpoint for the retracement.
   • Release the mouse button to draw the Fibonacci retracement levels.

6. Customizing Fibonacci Retracement:

   • Use the settings menu to customize the appearance of the Fibonacci levels, including colors and line styles.
   • Add or modify the levels based on your trading preferences.