What Are Fibonacci Retracements and Fibonacci Ratios

[mohawwll]

KEY TAKEAWAYS​

• Fibonacci retracements are popular tools that traders can use to draw support lines, identify resistance levels, place stop-loss orders, and set target prices.
• A Fibonacci retracement is created by taking two extreme points on a stock chart and dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8%, and 100%.1
• Fibonacci retracements suffer from the same drawbacks as other universal trading tools, so they are best used in conjunction with other indicators.

 

[Fin_Trader]

Fibonacci retracements suffer from the same drawbacks as other universal trading tools, so they are best used in conjunction with other indicators.

Fibonacci levels are constructed based on two significant points on the chart: the start and end of the move. Different traders may choose different points to plot, leading to different results. This subjectivity makes the application of Fibonacci levels less reliable, since the same chart may give different levels depending on which points are chosen for analysis.