How to Use Fibonacci Retracement in Trading

Understanding Fibonacci Retracement

Fibonacci retracement is a technical analysis tool used by traders to identify potential reversal levels in a market. Based on the Fibonacci sequence, it employs key horizontal lines representing levels of support or resistance to predict price movements.

Implementing Fibonacci Retracement

To use this tool, follow these steps:
1. Identify the trend: Determine if the market is in an uptrend or downtrend.
2. Select the Fibonacci tool: Apply it from the recent high to low (or low to high).
3. Watch key levels: Focus on the 23.6%, 38.2%, 50%, 61.8%, and 100% levels for entry and exit points.

Summary Table

| Level | Significance |
|———–|———————|
| 23.6% | Minor correction |
| 38.2% | Potential support |
| 50% | Psychological level |
| 61.8% | Strong support |
| 100% | Full retracement |

By integrating Fibonacci retracement in your trading strategy, you can enhance your decision-making process and potentially maximize profits. Always remember to combine it with other indicators for improved accuracy.