The Fibonacci retracement tool is based on the Fibonacci series, discovered by the Italian mathematician Leonardo Fibonacci. The series is: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34…
As you can see, every term is obtained by adding the two previous terms. The important points are:
- if you measure the ratio of any 2 consecutive numbers, it is always the same – 0.618 – this is called the Golden Ratio!
- if you measure the ratio of 2 alternate numbers – for example 3 and 8, or 13 and 34, you get the same ratio – 0.382
In trading, the Fibonacci retracement levels are used to find the potential support and resistance areas. The Fibonacci extension levels are also known as profit taking levels.
- Fibonacci retracement levels are: 0.236 (23.6%), 0.382 (38.2%), 0.500 (50%), 0.618 (61.8%), 0.764 (76.4%)
- Fibonacci extension levels are: 0, 0.382, 0.618, 1.000, 1.382, 1.618
In order to make use of the Fibonacci series in trading, we need to identify a Swing High and Swing Low point.
- A Swing High is a candlestick with at least two lower highs on both the left and right of itself.
- A Swing Low is a candlestick with at least two higher lows on both the left and right of itself.
This is a video showing you how to apply the Fibonacci retracement tool on Coinigy. I have used it on the POWR / ETH exchange pair.
TUTORIAL: How to use Fibonacci retracement tool to find support and resistance levels on Coinigyhttp://www.drcrypto.co.uk/trading/ta-the-fibonacci-retracement-tool-for-support-resistance-levels/
Posted by Doctor Crypto on Sunday, 3 December 2017
As we can see from the graph, there is a clear support level around the 50% mark and the price did not fall lower than that, in fact it shot back up even higher than previously!