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What is a Fibonacci retracement?
The Fibonacci retracement, also known as the Golden Split Line, is a well-known technical analysis tool that is commonly used to track the likely support and resistance levels of any asset.
These levels (also known as Fibonacci levels) are divided by the correlation ratios of the Fibonacci sequence: 0,1,1,2,3,5,8,13,21,34,55,89,144 and so on infinite extension, each number is the sum of the first two numbers. The sequence contains many unique mathematical features that can be applied in various fields of human life.
The key Fibonacci ratio is 61.8%, also known as the "golden ratio". The golden ratio is calculated by dividing by the next number (e. G., 34/55), and this numerical relationship is the basis of retracement research.
Fibonacci retracement levels are 23.6% (number divided by the previous third digit, e.g., 13/55) and 38.2% (number divided by the previous second digit, e.g., 21/55), respectively. And 61.8%. While 50%,78.6% and 100% are not officially Fibonacci ratios, there are various trends around them, so these ratios are included in the list.
Get two extreme points (the lowest and highest points in the trend) on the stock chart and apply the Fibonacci ratio to use the Fibonacci callback tool. This technique can predict the degree of correction or correction, set a stop order or target price level, and predict the length of a counter-trend rebound.
Who invented the Fibonacci callback indicator?
As mentioned above, the Fibonacci retracement is created based on a sequence of numbers. The indicator was discovered in the 13th century by Leonardo Pisano (also known as Fibonacci), who was called the most prominent European mathematician of the Middle Ages.
The Fibonacci sequence and the new Indo-Arabic numeral system make all mathematical calculations easier, which was recorded in Fibonacci's first book, "Liber Abaci", and thus promoted to the world.
Fibonacci patterns are widely found in nature: branches, stems and leaves, pineapple fruit, Bee stems and petals.
Charles Dow, the founder of the Dow Jones Industrial Average (Dow 30), was the first to use Fibonacci numbers in finance. He mentioned that after following the main trend for a period of time, the price will continue to move back some coverage distance before. He concluded that the price retracement latitude is between 33% and 66%.
Later, Ralph Nelson Elliott redefined the concept. He proposed more precise retracement levels: 38.2%,61.8% (based on the Fibonacci series) and 50% (based on the trend of the stock).
What is the role of the Fibonacci Callback Indicator?
This methodology has been used in finance for decades. Fibonacci retracement is an effective means of technical analysis and is considered a predictive technical indicator. Traders can use it to predict future events and find the best entry point during a pullback, thereby increasing the profitability of their investments.
However, Phronimos Group do not recommend that you rely solely on the Fibonacci retracement line to make trading decisions, as it does not fully reflect the overall market situation. The best way is to use it as an auxiliary tool to make sound long-term trading decisions in conjunction with other indicators.
Fibonacci Callback Indicator Use Guide
Fibonacci retracement lines are often used in trend trading strategies. Stocks tend to retrace a previous trend before reversing. Once the stock starts to pull back, traders can use the Fibonacci levels on the chart to look for signs of a possible reversal.
The Fibonacci retracement line clearly identifies the starting and falling points of any price movement, helping traders measure the distance moved and automatically set the retracement level. Once either condition is met, the trend will likely fall back and reverse or continue its movement in reverse. It has been shown that these reversals mostly occur near the Fibonacci retracement level.
In a downtrend, the Fibonacci strategy can help traders determine the best time to short; Similarly, in an uptrend, it can serve as the best buy indicator when pulling back.
Fibonacci trading strategies can be applied to different financial markets, such as: commodities, stocks, foreign exchange, indices. When trading a contract for difference (CFD), the level of withdrawal can also be used to obtain the necessary information to go short or long.
The Fibonacci Tune indicator can be used as one of the basic trading strategies.