#SwingTradingStrategy
Fibonacci Retracements
Fibonacci tools are widely used in swing trading to identify potential support and resistance levels within an established trend. Fibonacci retracements are based on the idea that after a significant price movement, the price will tend to retrace a predictable portion of that movement before continuing in the original direction.
How to use Fibonacci retracements?
1. Identify a trend: There should be a clear upward or downward trend.
2. Draw the Fibonacci: In an upward trend, draw from the low to the high of the movement. In a downward trend, draw from the high to the low.
3. Observe key levels: The most common retracement levels are 23.6%, 38.2%, 50%, 61.8%, and 78.6%. These levels act as potential support areas in an upward trend and resistance in a downward trend.
4. Look for confluence: Increase the probability of success by looking for confluence with other indicators or support/resistance levels.
5. Set your trade: Consider entering in the direction of the trend when the price reaches a Fibonacci level and shows signs of reversal. Place your stop-loss slightly above/below the level and define your target at the next Fibonacci level or a previous high/low.
In this example of an upward trend, the Fibonacci is drawn from the low to the high. The price retraces to the 61.8% level before continuing its upward movement. A swing trader could have looked for a buying opportunity in this area.⬇️⬇️⬇️$BTC