Fib Retracement Is An Analysis Technique, Here's The Explanation!

Fib retracement is a buying and selling analysis technique that is often used by crypto traders and investors. While this technique can be very effective in determining entry and exit positions in the market, it can also be risky if not used the right way. 

Typically, Fibonacci retracements are used by traders in the foreign exchange (forex) market. But recently, this analysis is often used in technical analysis cryptocurrencies.

Fib Retracement Is?

Fib retracements are a series of numbers called Fibonacci numbers. The purpose of Fibonacci retracements is to try to show support and resistance levels of an asset's price.

These numbers were first introduced to Europe by the mathematician Leonardo Pisano (Fibonacci). The numbers form a sequence known as the Fibonacci sequence. Each number in the sequence is the sum of the last two numbers that precede it. They follow the values 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144 and so on. 

The fiber retracement levels are 23.6 percent, 38.2 percent, 61.8 percent and 78.6 percent. Some traders add a value of 50 percent which is not a true Fibonacci number, but can be used as a guide during a downside retracement halfway between 38.2 and 61.8 percent.

Using this method, a pattern is drawn between the high and low points. The figure then shows the support and resistance levels between these points.

It is said that when the price approaches the Fibonacci area, the trend may change. However, keep in mind that this possibility is not absolute. You need other indicators to help draw conclusions.

Fib Retracement Function

The function of the fiber retracement is to determine the next support and stop. If you can understand this, you will know at what price you entered and exited the market. Not only that, you can also set a square when you have to stop loss or fix the price.

If the price continues to rise until it reaches a Fibonacci level, it is likely that the price will continue to increase. Likewise, if the price does not penetrate the Fibonacci level, it is likely that the price will reverse so that you can find a stop at that level.

Fibonacci retracements work well during high periods. Apart from that, you can also connect with other patterns. It should be understood that fiber retracements are horizontal levels.

Unlike moving averages which change frequently, these static levels can help in making decisions quickly. This topic is based on your understanding of the two main points which are the first signs of the Fibonacci lines that you use to analyze. That is, the dot moves up and down. 

Also read: Recognize this Bearish Candlestick So You Don't Get Stuck!

How to Use Fibonacci Retracements 

You don't have to worry about finding the Fibonacci sequence as difficult as when you were in school. Most products already offer this feature in their calculations.

Once Fibonacci is found on the chart, you should see that any price goes up to a status level, changes change. Take the value you want when it goes up to match another Fibonacci number, say it's at 23.60 percent.

It can also be used on the bottom, but the pattern is reversed, and the fiber retracement is a return to a higher level.

Also read: How to Read Crypto Candlesticks for Beginner Traders

Don't forget, you can stake VCG Tokens at VCGamers to get an advantage when top up gaming. You can buy this token at Indodax and BitMax.

Get it updating VCG Tokens the latest only on VCNews!