Fibonacci retracement is one of the most powerful tools traders use to identify potential support and resistance levels in trending markets. These levels, derived from the Fibonacci sequence, help predict where price pullbacks might end before the trend resumes.
How Does It Work?
1- Identify a strong move (trend direction). In this case, we see an uptrend after a sharp decline.
2- Apply the Fibonacci retracement tool from swing low to swing high to map key levels.
3- Watch how price reacts at important retracement levels:
🔸 0.236 (23.6%) – Weak retracement, minor support/resistance.
🔸 0.382 (38.2%) & 0.5 (50%) – Moderate pullback, potential reversal zones.
🔸 0.618 (61.8%) – The Golden Ratio, often a strong level for trend continuation.
🔸 0.786 (78.6%) – Deeper retracement, last defense before a reversal.
How to Use It for Trading?
- Look for buying opportunities at the 0.5 or 0.618 retracement if price finds support.
- Watch for resistance near 0.382 or 0.5 in a downtrend.
- Combine Fibonacci with candlestick patterns, volume, or indicators (RSI, MACD) for confirmation.
In this chart, we see price bouncing from the Fibonacci levels, showing how these zones act as potential support and resistance!
How Does It Work?
1- Identify a strong move (trend direction). In this case, we see an uptrend after a sharp decline.
2- Apply the Fibonacci retracement tool from swing low to swing high to map key levels.
3- Watch how price reacts at important retracement levels:
🔸 0.236 (23.6%) – Weak retracement, minor support/resistance.
🔸 0.382 (38.2%) & 0.5 (50%) – Moderate pullback, potential reversal zones.
🔸 0.618 (61.8%) – The Golden Ratio, often a strong level for trend continuation.
🔸 0.786 (78.6%) – Deeper retracement, last defense before a reversal.
How to Use It for Trading?
- Look for buying opportunities at the 0.5 or 0.618 retracement if price finds support.
- Watch for resistance near 0.382 or 0.5 in a downtrend.
- Combine Fibonacci with candlestick patterns, volume, or indicators (RSI, MACD) for confirmation.
In this chart, we see price bouncing from the Fibonacci levels, showing how these zones act as potential support and resistance!
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.