How To Identify Entry & Exit Points with Fibonacci Retracement Levels

Fibonacci Retracements are ratios used to determine possible inflection points. These proportions appear in the Fibonacci sequence. The two most prevalent Fibonacci Retracements are 61.8% and 38.2%. Nota bene: 38.2 percent is frequently rounded to 38 percent, whereas 61.8 percent is rounded to 62 percent.

After an advance, chartists use Fibonacci ratios to determine retracement levels and estimate the magnitude of a pullback or correction. After a downturn, Fibonacci Retracements may also be used to estimate the duration of a countertrend bounce. These retracements may be coupled with other indicators and price patterns to develop a comprehensive trading strategy.

Fibonacci levels are important but cannot always pinpoint specific market turning points. They offer an approximation of the entry zone but not the actual entry point. There is no assurance that the price will halt and reverse at one or any of the Fibonacci levels.

If the price completely retraces the previous price wave, this may indicate that the trend has failed. In addition, the Fibonacci retracement method may not give much information when applied to extremely minor price fluctuations. The tiers will be so closely spaced that nearly every price level will seem significant.
On pullbacks, Fibonacci retracements indicate regions of interest to monitor. They can provide confirmation if a trade signal is generated in the vicinity of a Fibonacci level. Fiddle with the Fibonacci retracement levels.

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