Fibonacci Retracement Support and Resistance Levels

    Posted by Admin on 28 May 2015 0

    What is Fibonacci Retracement

    Fibonacci retracement is a move in a security that "retraces" a portion of the previous swing. Usually a stock will retrace at one of 3 common Fibonacci levels - 38.2%, 50%, and 61.8%.
    The Fibonacci retracement is created by taking two extreme points, which are usually the highest peak and the lowest trough on the chart. We call them swing (last move) high and the swing low.

    Fibonacci retracement levels are a common technical analysis tool used in Stock and Forex trading. They show us by how much a market movement has the potential to retrace or pull back and can help us to determine the potential support and resistance levels. From these, Technical analyst can identify potential buy and sell entry points and also estimate likely reversal points during an up- or down-trend. .

    If a stock retraces more than 100% of the prior swing you can calculate a Fibonacci extension to forecast areas of support or resistance levels.

    Fibonacci Retracement Levels

    The key Fibonacci retracement levels are 23.6%, 38.2 %, 50 %  61.8 %. and 100%. Where the ratio of 61.8%, which is called the "Golden Ratio" is found by dividing a number in the sequence by the number that precedes it. For example: 21 ÷ 13 = 1.6154, 34 ÷ 21 = 1.6190 and 55 ÷ 34 = 1.6176.

    Most trading platforms usually automatically calculate the retracement levels.

    Learn >> How to use Fibonacci Retracement in Forex Trading

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