Stock trading can be a tricky business, but there are tools and indicators that can help you make better decisions. One of these tools is called Fibonacci Retracements.
Fibonacci Retracements are a way to predict how much a stock’s price might change after it goes up or down. They are based on a mathematical sequence discovered by an Italian mathematician named Fibonacci.
To use Fibonacci Retracements, you first need to find the highest and lowest points of a stock’s price. Let’s say a stock’s highest point was $100 and its lowest point was $50. You would then draw a line from the highest point to the lowest point. On this line, you would mark off several key levels. These levels are based on the Fibonacci sequence, which is a series of numbers where each number is the sum of the two previous numbers.
The key levels that you would mark off on the line are 23.6%, 38.2%, 50%, 61.8%, and 100%. These levels are known as retracements. They represent the percentage of the stock’s price that might change if the stock starts to go up or down again.
For example, if the stock’s price goes up and reaches the 50% retracement level, it might mean that the stock’s price will go up another 50%. If it reaches the 61.8% retracement level, it might mean that the stock’s price will go up another 61.8%.
Fibonacci Retracements can be a helpful tool for stock traders, but it’s important to remember that they are not a guarantee. They are simply a way to predict how much a stock’s price might change. It’s always a good idea to use multiple indicators and do your own research before making any decisions about buying or selling stocks.
To sum up, Fibonacci Retracements are a way to predict how much a stock’s price might change. They are based on a mathematical sequence and key levels are marked off on a line drawn from the highest to the lowest point of the stock’s price. It can be a helpful tool but it is not a guarantee, it’s always a good idea to use multiple indicators and do your own research before making any decisions.
