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What is a Fibonacci retracement?

Support and resistance

Fibonacci retracements are used for predicting levels of support and resistance for a given market and are used immediately after a strong price movement either up or down. An imaginary vertical line is drawn across the chart between two extreme price values, one high and one low. Then a number of horizontal lines are drawn perpendicular to the imaginary vertical at significant Fibonacci values. 

A Fibonacci retracement can help to predict levels of support and resistance within a large price reversal, allowing traders to anticipate medium-sized fluctuations in price and trade accordingly.

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