The Fibonacci index is most actively used to calculate support and resistance levels for swings in price. Fibonacci retracement levels use horizontal lines to indicate areas of support or resistance at the key Fibonacci levels before the trend continues in the original direction.
These levels are created by drawing a trendline between the high and low and then dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%.
The Fibonacci Retracement indicator can be added to a chart in Tradingview as you can see in the image to the left.
To actually use the indicator you just have to click at the low of the wave and then click on the peak. After you do that you will get something like this.
Generally speaking the 0.786 and 0.382 levels are the strongest. I picked this example randomly, not because it proved the point. But you can see very clearly how often these support and resistance lines are hit and how you can use them to trade
In this Litecoin chart you can see that the 0.236 and 0.38 levels played major roles as supports and the 0.618 and 0.5 levels turned into major resistance levels.
The FIB’s are not always completely accurate. When using this indicator, use always your mind also, don’t try to push extreme situations and price. Just because you are buying at the 0.236 level doesn’t mean the price will go up with 100% certainty but if you keep your trading to high probability events like this, you will notice a big increase in your profitability.
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This article was written by CoinLoop the market leading cryptocurrency information platform. Check it out here.
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