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Fibonacci Retracement Formula:
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Fibonacci retracement is a technical analysis tool used to identify potential support and resistance levels in financial markets. It's based on the Fibonacci sequence and is commonly used in trading to predict potential reversal points.
The calculator uses the Fibonacci retracement formula:
Where:
Explanation: The formula calculates potential retracement levels between a high (max) and low (min) point in price movement.
Details: Fibonacci retracement levels are widely watched by traders and can indicate potential areas where the price might reverse or consolidate. They are particularly useful in trending markets.
Tips: Enter the max and min prices in USD, and select a Fibonacci level between 0 and 1. Common Fibonacci levels are 0.236, 0.382, 0.5, 0.618, and 0.786.
Q1: What are the most important Fibonacci retracement levels?
A: The key levels are 23.6%, 38.2%, 50%, 61.8%, and 78.6%. The 61.8% level is often considered the most significant.
Q2: How do I choose the correct max and min points?
A: Select the most recent significant swing high (max) and swing low (min) in the price chart for the time frame you're analyzing.
Q3: Can Fibonacci retracement be used for all time frames?
A: Yes, Fibonacci retracement can be applied to any time frame from minutes to monthly charts, though longer time frames tend to be more reliable.
Q4: Are Fibonacci retracements reliable?
A: While not perfect, they are widely followed by traders and often become self-fulfilling prophecies. They work best when combined with other technical indicators.
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.