Fibonacci Retracement

Fibonacci Retracement is a technical analysis tool for indicating where possible support and resistance levels are based on horizontal trendlines. Fibonacci level is associated with a percentage, which is how much the price has retraced from the previous move. Fibonacci retracement levels are 23.6%, 38.2%, 61.8% and 78.6%.

Fibonacci retracement may not be useful for determining overall trends in price, but indicator is very helpful for predicting levels of support and resistance within a large price reversal. Using this indicator, prices can be drawn between any two selected price points (such as highs and lows), and then support and resistance levesl can be identified by the retracement levels between these two points. It allows traders to anticipate moderate fluctuations in price and trade accordingly.