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What Are Fibonacci
Retracement Levels?
What Are Fibonacci Retracement Levels?
• Fibonacci retracement levels—stemming from the Fibonacci sequence—are horizontal lines that indicate
where support and resistance are likely to occur.
• Each level is associated with a percentage. The percentage is how much of a prior move the price has
retraced. The Fibonacci retracement levels are 23.6%, 38.2%, 61.8%, and 78.6%. While not officially a
Fibonacci ratio, 50% is also used.
• The indicator is useful because it can be drawn between any two significant price points, such as a high and
a low. The indicator will then create the levels between those two points.
• Suppose the price of a stock rises $10 and then drops $2.36. In that case, it has retraced 23.6%, which is a
Fibonacci number. Fibonacci numbers are found throughout nature. Therefore, many traders believe that
these numbers also have relevance in financial markets.
• Fibonacci retracement levels were named after Italian mathematician Leonardo Pisano Bigollo, who was
famously known as Leonardo Fibonacci. However, Fibonacci did not create the Fibonacci sequence. Instead,
Fibonacci introduced these numbers to western Europe after learning about them from Indian merchants.
How to use Fibonacci Retracement
Levels?
• Fibonacci retracement levels are horizontal lines that indicate the possible support and resistance levels
where price could potentially reverse direction.
• The first thing you should know about the Fibonacci tool is that it works best when the market is trending.
• The idea is to go long (or buy) on a retracement at a Fibonacci support level when the market is trending UP.
• And to go short (or sell) on a retracement at a Fibonacci resistance level when the market is trending DOWN.
• Fibonacci retracement levels are considered a predictive technical indicator since they attempt to identify
where price may be in the future.
How to draw Fibonacci Retracement
Levels
Drawing Fibonacci retracement levels is a simple three-step process:
In an uptrend:
• Step 1 – Identify the direction of the market: uptrend
• Step 2 – Attach the Fibonacci retracement tool on the bottom and drag it to the right, all the way to the top
• Step 3 – Monitor the three potential support levels: 0.236, 0.382 and 0.618
In a downtrend:
• Step 1 – Identify the direction of the market: downtrend
• Step 2 – Attach the Fibonacci retracement tool on the top and drag it to the right, all the way to the bottom
• Step 3 – Monitor the three potential resistance levels: 0.236, 0.382 and 0.618
Fibonacci Retracement Levels for
TradingView

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FIB retracement.pptx

  • 2. What Are Fibonacci Retracement Levels? • Fibonacci retracement levels—stemming from the Fibonacci sequence—are horizontal lines that indicate where support and resistance are likely to occur. • Each level is associated with a percentage. The percentage is how much of a prior move the price has retraced. The Fibonacci retracement levels are 23.6%, 38.2%, 61.8%, and 78.6%. While not officially a Fibonacci ratio, 50% is also used. • The indicator is useful because it can be drawn between any two significant price points, such as a high and a low. The indicator will then create the levels between those two points. • Suppose the price of a stock rises $10 and then drops $2.36. In that case, it has retraced 23.6%, which is a Fibonacci number. Fibonacci numbers are found throughout nature. Therefore, many traders believe that these numbers also have relevance in financial markets. • Fibonacci retracement levels were named after Italian mathematician Leonardo Pisano Bigollo, who was famously known as Leonardo Fibonacci. However, Fibonacci did not create the Fibonacci sequence. Instead, Fibonacci introduced these numbers to western Europe after learning about them from Indian merchants.
  • 3. How to use Fibonacci Retracement Levels? • Fibonacci retracement levels are horizontal lines that indicate the possible support and resistance levels where price could potentially reverse direction. • The first thing you should know about the Fibonacci tool is that it works best when the market is trending. • The idea is to go long (or buy) on a retracement at a Fibonacci support level when the market is trending UP. • And to go short (or sell) on a retracement at a Fibonacci resistance level when the market is trending DOWN. • Fibonacci retracement levels are considered a predictive technical indicator since they attempt to identify where price may be in the future.
  • 4. How to draw Fibonacci Retracement Levels Drawing Fibonacci retracement levels is a simple three-step process: In an uptrend: • Step 1 – Identify the direction of the market: uptrend • Step 2 – Attach the Fibonacci retracement tool on the bottom and drag it to the right, all the way to the top • Step 3 – Monitor the three potential support levels: 0.236, 0.382 and 0.618 In a downtrend: • Step 1 – Identify the direction of the market: downtrend • Step 2 – Attach the Fibonacci retracement tool on the top and drag it to the right, all the way to the bottom • Step 3 – Monitor the three potential resistance levels: 0.236, 0.382 and 0.618