Crypto Trading 101: The Fibonacci Retracements

Luckily for traders, Fibonacci retracements are far more than just a nifty word.

Examples of the Fibonacci sequence in nature are seemingly endless and this expands to trading when it comes to analyzing price action.

Before using the Fibonacci tool to identify potential support or resistance levels, a trader must first be able to identify a "Swing high" and "Swing low."

Once these points are identified, select the Fibonacci retracement tool in your trading software to connect a swing low to a swing high.

In the above chart, monero's swing high of 0.03815/BTC was connected to the swing low of 0.0111/BTC on the daily time frame using the Fibonacci retracement tool.

The retracements will again appear by dividing the distance from trough to peak using ratios in the Fibonacci sequence.

In the above chart, the anticipated resistance levels for ethereum classic were calculated using the Fibonacci tool by connecting the swing low of 0.001304/BTC to the swing high of 0.001304.

If a moving average is in the same location as a Fibonacci retracement, price is more likely to react to the level given there lie two support or resistance obstacles, which when combined are more powerful than one.

If you went through the sequence calculating each ratio, you may have noticed 0.5 is not one of them yet, it appears as a level in the Fibonacci Retracement tool.

Its true, 0.5 is not a ratio in Fibonacci sequence but is included in the tool because it marks a 50 percent trend retracement, which price has a funny way of reacting to as support or resistance.