Basic Concepts of Technical Analysis – Fibonacci Levels
What is Fibonacci Retracement?
The Fibonacci retracement is one of the most popular and effective tools in technical analysis. It helps identify possible trend reversal points, revealing strong support and resistance levels, as well as targets for corrections and continuations.
The Fibonacci Sequence
The famous sequence was popularised by Leonardo Fibonacci: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377…
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Key ratios: 0.618 and 1.618 (golden ratio). Ralph Elliott incorporated these into the Elliott Wave Theory.
How to Use Fibonacci Retracement
Most platforms have the Fibonacci Lines tool. Levels: 0% – 23.6% – 38.2% – 50% – 61.8% – 76.4% – 100%. For continuations: 161.8% – 261.8% – 423.6%.
Practical tip: In an uptrend, draw from bottom to top; in a downtrend, from top to bottom.
Strategies
- Buy: when price retraces to support and bounces.
- Sell: when price rises to resistance and reverses.
Conclusion
Mastering Fibonacci levels helps predict reversal and continuation zones, offering a clear map for safer trading.