How to successfully utilize the Fibonacci retracement tool.

COINBASE:BTCUSD   Bitcoin / U.S. Dollar
A beginners guide to Fibonacci retracement .

What is Fibonacci retracement?
- "In technical analysis , Fibonacci retracement is created by taking two extreme points (usually a major peak and trough) on a stock chart and dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%." - Investopedia

In english?
Fibonacci retracement is a ratio that can help you determine a buy/sell strategy after a pullback ( drop ). It is best utilized after a huge drop in market valuation.

In the following image, I have put together an example of the Fibonacci retracement tool in Tradingview.

How to use Fibonacci retracement:

Step 1: Find an asset that has recently made a huge drop in market valuation, and seems to be back on an uptrend.

Step 2: Select the Fibonacci retracement tool located in the tools panel on the left.

Step 3: Click once on the previous peak where the price spiked, then move your mouse down to the current price and go over to the right to click a point on the chart that you want to have all your shares sold by (endpoint).

Now that you have your Fibonacci retracement setup, the idea is to sell 25% of your initial investment at each of these levels indicated by the Fibonacci retracement tool: .38, .50, .61, and 1.0.

REMEMBER: Be disciplined. Determine a 'stop limit' of when you want to sell your shares if the value of your holdings goes down and set an alert. Nobody likes to sell after a decrease in valuation; however, you always want to keep your shares 'active' and avoid owning depreciated shares over a long period of time.

Thanks for reading, and happy trading!


What's your take on the "Reverse" action on fibonacci? I've been trying both for months and can't seem to pin down which is better.
+7 Reply
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