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If you take the drop and multiple that decline by 38.2% and then add that figure to the low , you would find the 38.2% Fibonacci retracement level, which is 2,647. Is it fair to look at the prior up/down move of only last 5 days ? In the examples given above also it seems the prior uptrend / downtrend extending to large no. of days or even weeks for that matter. To fully understand and appreciate the concept of Fibonacci retracements, one must understand the Fibonacci series. The origins of the Fibonacci series can be traced back to the ancient Indian mathematic scripts, with some claims dating back to 200 BC.
Generally, traders prefer to be on the safe side and enter the trade when the price has already bounced from one of the Fibonacci levels. But some traders choose an aggressive style of trading and don’t wait for the price to bounce off before entering a trade. In this case, Fibonacci retracement levels can also be used to place a Stop Loss order as a safety measure.
What timeframes can be used for Fibonacci retracements?
These retracement levels provide support and resistance levels that can be used to target price objectives. In technical analysis, https://www.bigshotrading.info/ levels indicate key areas where a stock may reverse or stall. Common ratios include 23.6%, 38.2%, and 50%, among others.
Fib levels tend to work best after a significant move in a trending market. As price begins to retrace, fib levels tend to form support or resistance .
Fibonacci retracement levels
This level is a bit above the standard Fibonacci correction level. As you can see, the market activity magically increases when the price enters the Fibonacci retracement level action zone.
In a downtrend you select the swing high and drag the cursor to the swing low. In an uptrend you select the swing low and drag the cursor to the swing high. A swing high forms when price reaches a new high Fibonacci Retracement relative to any preceding highs. Once price moves above a swing high and begins to retrace a new swing high has formed. I’m including it in this guide because it’s probably the most referenced level.