Fibonacci Retracement and Extensions
Yaser Rahmati | یاسر رحمتی
Last updated
Yaser Rahmati | یاسر رحمتی
Last updated
Fibonacci retracement and extension levels are popular tools used in technical analysis to identify potential support and resistance levels in financial markets. They are based on the Fibonacci sequence, a mathematical series where each number is the sum of the two preceding ones.
The Fibonacci sequence is: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, ...
The key Fibonacci ratios used in trading are derived from this sequence:
Retracement levels: 23.6%, 38.2%, 50%, 61.8%, 78.6%
Extension levels: 127.2%, 161.8%, 200%, 261.8%, 423.6%
Determine the overall trend direction (uptrend or downtrend).
In an uptrend, you'll draw the Fibonacci retracement from the swing low to the swing high.
In a downtrend, you'll draw the retracement from the swing high to the swing low.
Select a significant high and low on the chart.
For an uptrend:
Place the Fibonacci retracement tool at the swing low and drag it to the swing high.
For a downtrend:
Place the tool at the swing high and drag it to the swing low.
The retracement levels (23.6%, 38.2%, 50%, 61.8%, 78.6%) indicate potential support (uptrend) or resistance (downtrend) levels where the price might reverse.
Identify three points: the swing low, swing high, and a retracement point.
For an uptrend:
Start from the swing low to swing high, and then to the retracement point.
For a downtrend:
Start from the swing high to swing low, and then to the retracement point.
The extension levels (127.2%, 161.8%, 200%, 261.8%, 423.6%) indicate potential levels where the price could extend after breaking the previous high or low.
Use Fibonacci levels in conjunction with other technical indicators (e.g., moving averages, RSI, MACD) to confirm signals.
In an uptrend, look for buy signals near the Fibonacci retracement levels (e.g., 38.2%, 50%, 61.8%).
In a downtrend, look for sell signals near the retracement levels.
Use Fibonacci extensions to set profit targets. For example, if the price retraces to the 61.8% level and resumes the trend, set the target at the 127.2% or 161.8% extension level.
Place stop-loss orders just beyond the next Fibonacci level to minimize losses. For example, if you enter at the 61.8% retracement, place a stop-loss just below the 78.6% level.
Fibonacci retracement, Fibonacci extensions, support levels, resistance levels, technical analysis, trading strategy, swing high, swing low, retracement levels, extension levels, 23.6%, 38.2%, 50%, 61.8%, 78.6%, 127.2%, 161.8%, market trends, price reversal, entry points, یاسر رحمتی
