Chapter 4 Fibonacci retracement
Among the most popular Fibonacci levels are Fibonacci retracement levels, which help identify potential support and resistance zones. These levels are often used to identify entry (buy) and exit (sell) points, or to decide where to put a trigger for stop orders. These are automatically executed when a certain price is reached, preventing significant losses in the process.
Each level of Fibonacci retracement is associated with a set percentage, which is derived from the Fibonacci sequence. The percentage tells how much of a prior move the price has retraced.
These percentages are 23.6%, 38.2%, 61.8% and 78.6%. Converted into decimal values, the Fibonacci retracement levels are 0, 0.236, 0.382, 0.5, 0.618, 0.786 and 1.
0 and 1 are the anchors for Fibonacci retracement levels and represent the swing high and swing low. While not an actual number in a Fibonacci sequence, 0.5 is also considered an important retracement level.
