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Understanding and Using Fibonacci Retracements in Stock Trading

If you are considering the use of Fibonacci retracements in your stock trading ventures but you are not sure where to start, then you have come to the right place. In order for you to benefit from using this method of plotting, it is very important that you know exactly how to use it before taking the plunge.

What Are Fibonacci Retracements?

In financial terms, Fibonacci retracements is a well-known method of technical analysis that is used to determine the areas of support and resistance levels within a trend’s range. This is primarily based on the idea that any given financial asset’s move in price range will potentially retrace or correct before continuing its initial, original trending path. The retracement itself is created by two extreme charting points in which the vertical distance thereof is divided by the key Fibonacci ratios. Generally speaking, 0% would be the actual start of a retracement, while 100% will be a reversal to the original move.

The Math

This indicator uses mathematical ratios that are based on the relationship between set sequences of numbers known as the Fibonacci sequence. Here, two consecutive numbers are added in order to get the next number. (Read More….)