Fibonacci Retracement Level
Fibonacci Retracement Levels are technical analysis tools used to identify potential levels of support and resistance in the price of a cryptocurrency. These retracements, or pullbacks, occur when an asset’s price temporarily reverses from its trend direction before resuming the original trajectory. The Fibonacci sequence is a set of numbers discovered by Italian mathematician Leonardo de Pisa in 1202 AD which became popular with traders due to its predictive properties.
The Fibonacci retracement tool works by taking two extreme points on a chart and dividing the vertical distance between them by major ratios found within the Fibonacci sequence: 23.6%, 38.2%, 50%, 61.8% and 100%. These values are then drawn as horizontal lines onto the chart and can be used as guides for assessing risk, determining entry positions and setting profit targets (i.e., take-profit orders).
For example, if Bitcoin displays an uptrend but experiences a sharp decline at some point during that trend, it could be identified as a potential level for buying support using these ratios; that is, if prices start to move up again after hitting this level then it could signal that Bitcoin is likely to resume its upward trajectory soon afterwards since buyers were able to absorb all available supply at those lower levels. It should also be noted that these levels don’t always have to match exactly with one another; they can sometimes overlap with each other depending on how much time has elapsed between each peak or trough in the market cycle being studied.
When trading cryptocurrencies using Fibonacci retracement tools traders must remember that while they may offer insight into potential areas where prices could reverse their current trends they cannot guarantee future movements nor should they ever be taken as absolute indicators of what will happen next – markets are unpredictable and events outside our control can drastically alter their trajectories regardless of any prior analysis done on them beforehand! Therefore caution should always be taken when attempting to use this method alone without considering other factors such as news related announcements or economic data releases etc..
