# Fibonacci Retracement Level

## What Is a Fibonacci Retracement Level?

A Fibonacci retracement level is a technical analysis tool used to identify potential support and resistance levels in the price of an asset. It is based on the idea that markets will often retrace a portion of a prior move before continuing in its original direction. The Fibonacci sequence, which was developed by Italian mathematician Leonardo Fibonacci, consists of numbers where each number is the sum of the two preceding numbers (1, 1, 2, 3, 5, 8 etc.). These ratios are then applied to charts as horizontal lines at certain percentages (23.6%, 38.2%, 50%, 61.8% and 100%) to indicate areas where prices may find support or resistance after a significant move up or down. Traders use these levels as entry points for trades when they believe that prices have reached an extreme point and are likely to reverse course soon afterwards.

## How to Use Fibonnaci Retracement?

Fibonacci retracement is a popular technical analysis tool used to identify potential support and resistance levels. It is based on the Fibonacci sequence, which was developed by Italian mathematician Leonardo Fibonacci in the 13th century. The Fibonacci sequence consists of numbers that are derived from adding the two previous numbers together (1, 1, 2, 3, 5, 8…). By plotting these ratios onto a chart it can be used to identify areas where price may find support or resistance.

To use Fibonnaci Retracement one must first identify an existing trend in the market they wish to trade. Once identified draw a line connecting the high and low points of this trend. Then divide this line into sections using horizontal lines at 23%, 38%, 50%, 62% and 78%. These percentages represent key levels within the trend that could potentially act as either support or resistance for future price movements. If prices reach any of these levels traders should watch closely for signs of reversal or continuation depending on their trading strategy.

## How to Draw Fibonacci Retracement?

Fibonacci retracement is a popular technical analysis tool used to identify potential support and resistance levels. It is based on the Fibonacci sequence, which consists of numbers that form ratios found in nature. To draw Fibonacci retracements, you will need to first identify the high and low points of an asset’s price movement over a certain period of time. Once these two points are identified, you can then plot horizontal lines at 23.6%, 38.2%, 50%, 61.8% and 100%. These percentages represent possible areas where the asset may find support or resistance during its next move up or down respectively.

When plotting your Fibonacci retracements it is important to remember that they should not be taken as absolute values but rather as guidelines for potential entry/exit points when trading assets with strong trends such as stocks or currencies pairs. Additionally, traders should also consider other factors such as volume and momentum before making any decisions regarding their trades since these could affect how accurate the Fibonacci retracement levels are in predicting future prices movements for an asset being traded.

## What Is the Best Setting for Fibonacci Ratios?

The Fibonacci ratios are a set of mathematical relationships that can be used to identify potential support and resistance levels in the financial markets. The most commonly used ratio is 0.618, which is derived from dividing any number in the Fibonacci sequence by its immediate predecessor (e.g., 8/13 = 0.618). This ratio has been found to have predictive power when applied to price movements in stocks, commodities, currencies, and other assets.