Fibonacci Retracements are a powerful technical analysis tool used to predict potential reversal points in the market. This technique is based on the Fibonacci sequence, a series of numbers in which each number is the sum of the two preceding numbers (1, 1, 2, 3, 5, 8, 13, etc.). How Fibonacci Retracements Work Fibonacci Retracements are used to identify potential support and resistance levels. By applying Fibonacci ratios to a price chart, traders can identify areas where the price may retrace or reverse. Key Fibonacci Retracement Levels 1. 23.6%: A minor retracement level 2. 38.2%: A moderate retracement level 3. 50.0%: A significant retracement level 4. 61.8%: A major retracement level 5. 76.4%: An extreme retracement level Using Fibonacci Retracements in Trading 1. Identify a clear trend 2. Apply Fibonacci Retracements to the chart 3. Look for confluence with other technical indicators 4. Set buy or sell orders at key retracement levels Benefits of Fibonacci Retracements 1. Improved accuracy in predicting reversals 2. Enhanced risk management 3. Increased confidence in trading decisions By incorporating Fibonacci Retracements into your trading strategy, you can gain a deeper understanding of market movements and make more informed trading decisions.