27/01/2023
A Fibonacci chart, also known as a Fibonacci retracement chart, is a technical analysis tool that uses horizontal lines to indicate areas of support and resistance at the key Fibonacci levels. These levels are derived from the Fibonacci sequence, which is a series of numbers where each number is the sum of the two preceding ones, starting with 0 and 1. The key Fibonacci levels used in technical analysis are 23.6%, 38.2%, 50%, 61.8%, and 100%.
To create a Fibonacci chart, a trader would first identify a significant high and low point on a stock's price chart, this high and low points are used as a reference points to create the retracement lines. These lines are then used to indicate areas where the stock's price may experience resistance or support.
The 23.6% level is considered the weakest level of support or resistance, while the 38.2% and 50% levels are considered stronger levels. The 61.8% level is considered a key level and is often referred to as the "golden ratio" or the "golden mean", and the 100% level is used to indicate the point at which a stock's price has fully retraced its original move.
Fibonacci retracements can be used in conjunction with other technical analysis tools, such as trend lines and moving averages, to identify potential entry and exit points for trades. They are widely used among traders as a way to identify potential support and resistance levels.
It is worth noting that Fibonacci retracements are not a guarantee for price movements, but rather a tool for identifying possible levels where the price may encounter support or resistance. In conjunction with other tools and indicators, it can be used as a technique to enhance the decision making process.