Module 5 -Fibonacci Levels

What is Fibonacci on charts or trading?

Fibonacci on charts refers to the application of Fibonacci retracement and extension levels on price charts. Fibonacci analysis is a popular technical analysis tool that uses mathematical ratios derived from the Fibonacci sequence, a sequence of numbers in which each number is the sum of the two preceding ones (e.g., 0, 1, 1, 2, 3, 5, 8, 13, 21, and so on).

In the context of charts, Fibonacci retracement and extension levels are used to identify potential support and resistance levels, as well as price targets. Traders and analysts often use these levels to anticipate price reversals, areas of price consolidation, and potential price extensions.

Here are the key Fibonacci levels commonly used in chart analysis:

Fibonacci Retracement Levels: These levels are drawn by identifying a significant price swing (e.g., from a low to a high or from a high to a low) and then applying Fibonacci ratios as retracement levels. The most commonly used retracement levels are:

23.6% (0.236)

38.2% (0.382)

50% (0.500)

61.8% (0.618)

78.6% (0.786)

Traders use these levels to identify potential support or resistance areas where the price might reverse or consolidate before continuing in the direction of the original price swing.

Fibonacci Extension Levels: These levels are used to project potential price targets or extensions beyond the original price swing. They are drawn by identifying the beginning and end of a price swing and then applying Fibonacci ratios as extension levels. The most commonly used extension levels are:

127.2% (1.272)

161.8% (1.618)

261.8% (2.618)

423.6% (4.236)

Traders use these levels to identify potential areas where the price might reach as it extends beyond the original price swing.

Fibonacci retracement and extension levels are often displayed as horizontal lines or levels on price charts, allowing traders to visually analyze and interpret potential areas of interest. Many charting platforms and technical analysis tools provide built-in Fibonacci drawing tools or indicators that can automatically plot these levels on the charts.

It’s important to note that Fibonacci levels are not foolproof and should be used in conjunction with other technical analysis tools and indicators to make informed trading decisions. They are just one tool among many used by traders to assess potential price levels and market behavior.

What is the most common fibonacci used in crypto currency?

In cryptocurrency trading, the most commonly used Fibonacci retracement level is the 61.8% retracement level (0.618). This level is derived from the Fibonacci sequence and is often referred to as the “golden ratio” or “golden mean.”

The 61.8% retracement level is widely regarded as a significant level in technical analysis and is considered a key Fibonacci ratio. Traders and analysts use this level to identify potential areas of support or resistance in the price movement of cryptocurrencies.

When a cryptocurrency experiences a price correction or pullback after a significant upward or downward move, traders often look for price retracements to find potential buying or selling opportunities. The 61.8% retracement level is frequently observed as a level where the price may find support (in an uptrend) or encounter resistance (in a downtrend).

While the 61.8% retracement level is commonly used, it’s important to note that other Fibonacci retracement levels, such as 38.2%, 50%, 78.6%, and even 23.6%, are also considered relevant and can be used depending on the trader’s strategy and market conditions. It’s best to combine Fibonacci retracement levels with other technical analysis tools and indicators to increase the accuracy of trading decisions. 

The different fibonacci settings you can set as templates on your toolset:
https://tradetoprospa.net/free-courses/fibonacci-levels/fibonacci-settings/

This is a tutorial for people who are just starting off using tradingview and how to use the fib. retracement toolset on the charts to find a good level of interest, to enter a trade. We cover how to apply the fib. on long trades and shorting.

Using Fibonacci extension.

Using Fibonacci extension.