1. What is Fibonacci Retracement?

Fibonacci retracement is a technical analysis tool that uses horizontal lines to indicate areas of support or resistance at the key Fibonacci levels before the price continues in the original direction.

2. How Does the Calculator Work?

The calculator uses the Fibonacci retracement formula:

Where:

• \( high \) — The highest price in the trend
• \( low \) — The lowest price in the trend
• \( ratio \) — Fibonacci ratio (0.236, 0.382, 0.5, 0.618, or 0.786)

Explanation: The formula calculates potential reversal levels by subtracting a percentage of the price move (determined by Fibonacci ratios) from the high price.

3. Importance in Technical Analysis

Details: Fibonacci retracement levels are widely used to identify potential reversal points in financial markets. Traders watch these levels for possible entry points, stop-loss placement, or profit-taking areas.

4. Using the Calculator

Tips: Enter the high and low prices of the trend you're analyzing (in USD), select a Fibonacci ratio, and the calculator will show you the corresponding retracement level.

5. Frequently Asked Questions (FAQ)

Q1: What are the most important Fibonacci ratios?
A: The key ratios are 23.6%, 38.2%, 50%, 61.8%, and 78.6%. The 61.8% level (golden ratio) is considered the most significant.

Q2: How do I identify the high and low for the calculation?
A: Use the most recent significant swing high and swing low in the price trend you're analyzing.

Q3: Are Fibonacci levels reliable?
A: While not perfect, they work often enough that many traders watch them, creating self-fulfilling prophecies. Always use with other indicators.

Q4: Can I use this for any time frame?
A: Yes, Fibonacci retracements can be applied to any time frame from minutes to monthly charts.

Q5: What's the difference between retracement and extension?
A: Retracement measures pullbacks within a trend, while extension projects potential targets beyond the current trend.