In this article we have stated the best ways on How To Use Fibonacci Retracement by any trader who wants to maximize his/her profits using the fibonacci tool.
What Is Fibonacci Retracement
Fibonacci retracement is a popular technical analysis tool that traders use to identify potential levels of support and resistance in the market. It is based on the Fibonacci sequence, which is a series of numbers where each number is the sum of the two preceding ones (0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc.).
How To Use Fibonacci Retracement
To use Fibonacci retracement, traders first need to identify the significant high and low points on the chart. These points are then used to create horizontal lines on the chart at the key Fibonacci levels of 23.6%, 38.2%, 50%, 61.8%, and 100%. These levels represent potential areas where the market may experience support or resistance.
The 23.6% level is considered the shallowest retracement level and is typically used as a minor support or resistance level. The 38.2% level is considered the next level of importance and is often used as a key level of support or resistance. The 50% level is considered a neutral level, and the 61.8% level is considered a key level of resistance. The 100% level represents the point at which the market has retraced the entire move.
Traders can use Fibonacci retracement in conjunction with other technical indicators, such as moving averages and candlestick patterns, to confirm potential levels of support and resistance. It is also important to note that Fibonacci retracement levels are not always precise and should be used in conjunction with other technical analysis tools.
When using Fibonacci retracement, it is also important to consider the overall trend of the market. If the market is in an uptrend, traders should look for potential levels of support, and if the market is in a downtrend, traders should look for potential levels of resistance.
In conclusion, Fibonacci retracement is a valuable tool for traders to identify potential levels of support and resistance in the market. It is based on the Fibonacci sequence and can be used in conjunction with other technical analysis tools to confirm potential levels. However, it is important to remember that Fibonacci retracement levels are not always precise and should be used in conjunction with other technical analysis tools and an understanding of the overall market trend.
You can also read about How To Use Fibonacci Retracement and our articles on other Technical Indicator tools on Nairaland.