How to Use Fibonacci Retracement Levels in Fibonacci Trading

The Fibonacci retracement is a mathematical formula that is used to measure the price change on a particular stock or currency pair. This tool is useful when a market is in a downtrend because it helps you determine point B and point C when a trend has turned. When used correctly, this tool increases your odds of identifying a market reversal. Moreover, it can be used in conjunction with other technical analysis tools to provide more accurate signals. As far as interpreting the Fibonacci retracement tool goes, there are four basic levels that can be used. The first level is the Fibonacci retracement, which is the lowest point in the previous wave. The second level is the Fibonacci reversal, which is the maximum percentage of the previous move. The retracement tool is effective for identifying pivot points and areas where prices will likely move. It is most useful in trending markets, though it is not essential to know about the Fibonacci sequence to use this tool.