Fibonacci Levels (Fibonacci Retracement) - one of the most popular tools in swing trading, especially in the volatile cryptocurrency market. They help identify price correction zones and potential entry/exit points within a trend. The tool is based on the Fibonacci number sequence, where key levels (23.6%, 38.2%, 50%, 61.8%, 78.6%) often act as support and resistance zones.
Basics of Fibonacci Levels in Swing Trading
What are Fibonacci Levels? These are horizontal lines drawn on the chart from the minimum (swing low) to the maximum (swing high) in an uptrend or vice versa in a downtrend. Key correction levels: 23.6%, 38.2%, 50%, 61.8%, 78.6%. Additional levels (100%, 161.8%, 261.8%) are used for targets and extensions.
Why do they work? Fibonacci levels are popular among traders, making them self-fulfilling zones where price often stops or reverses due to mass actions of market participants.
Application in Swing Trading: Used to identify entry points during corrections in the trend or reversals, as well as to set profit targets.
