🤷🏻♂️Let’s explore a powerful tool for identifying support and resistance levels: Fibonacci Retracement (Fib). This post will explain what Fibonacci Retracement is, how it works, and provide a step-by-step guide on how to use it in the Binance mobile app to make informed trading decisions.🔥
📚 What Is Fibonacci Retracement (Fib)?
• Definition: Fibonacci Retracement is a technical analysis tool used to identify potential support and resistance levels based on the Fibonacci sequence. It plots horizontal lines at key Fibonacci levels (23.6%, 38.2%, 50%, 61.8%, and 100%) between a significant high and low on the chart.
• How It Works:
◦ The Fibonacci levels are derived from the Fibonacci sequence, a mathematical series where each number is the sum of the two preceding ones (e.g., 0, 1, 1, 2, 3, 5, 8, 13, etc.). The key ratios (23.6%, 38.2%, 50%, 61.8%) are calculated by dividing numbers in the sequence.
◦ Traders draw Fibonacci Retracement levels by selecting a recent swing high and swing low. The tool then plots the Fibonacci levels, which often act as support or resistance during pullbacks or rallies.
◦ The 50% and 61.8% levels are particularly significant, often acting as strong support/resistance, while the 38.2% level is a common retracement in strong trends.
• Use Cases:
◦ Support/Resistance: Fibonacci levels often act as support during pullbacks in an uptrend or resistance during rallies in a downtrend.
◦ Entry/Exit Points: Traders use Fibonacci levels to identify potential entry points during pullbacks (e.g., buying at the 61.8% level) or exit points near resistance (e.g., selling at the 50% level).
◦ Trend Continuation: A price bouncing off a Fibonacci level with high volume can confirm trend continuation.
🛠️ Step-by-Step Guide: How to Use Fibonacci Retracement in the Binance Mobile App
Here’s how to add and interpret Fibonacci Retracement on the Binance mobile app for any trading pair (e.g., BTC/USDT):
1 Open the Binance App:
◦ Launch the Binance mobile app on your device and log in to your account.
2 Navigate to the Trading Chart:
◦ Tap on the “Markets” tab at the bottom of the screen.
◦ Search for the trading pair you want to analyze (e.g., BTC/USDT) using the search bar at the top.
◦ Tap on the pair to open the trading interface, then tap on the chart icon (a candlestick chart symbol) to view the full chart.
3 Access the Drawing Tools:
◦ Unlike other indicators, Fibonacci Retracement is a drawing tool, not an indicator in the traditional sense. To access it, tap on the drawing tools icon (it looks like a pencil or ruler, usually located at the top of the chart).
◦ This will open the drawing tools menu.
4 Add the Fibonacci Retracement Tool:
◦ In the drawing tools menu, scroll down or search for “Fibonacci Retracement” (often abbreviated as “Fib Retracement”).
◦ Tap on “Fibonacci Retracement” to select it.
◦ To draw the Fibonacci levels:
▪ Identify a recent swing high and swing low on the chart. For an uptrend, the swing low is the starting point, and the swing high is the ending point. For a downtrend, the swing high is the starting point, and the swing low is the ending point.
▪ Tap and hold on the swing low (starting point), then drag to the swing high (ending point) and release.
◦ The Fibonacci Retracement levels will appear on the chart, showing horizontal lines at 0%, 23.6%, 38.2%, 50%, 61.8%, and 100%. You can adjust the levels or colors in the settings if needed.
5 Set the Timeframe:
◦ At the top of the chart, tap on the timeframe (e.g., 1H, 4H, 1D). For consistency with our previous analyses, select the 30-minute (30m) timeframe.
6 Interpret the Fibonacci Retracement:
◦ Support/Resistance: Check if the price is interacting with the Fibonacci levels. For example, if the price pulls back to the 61.8% level and bounces, it suggests strong support. If the price rallies to the 50% level and stalls, it suggests resistance.
◦ Trend Continuation: Look for a bounce off a Fibonacci level with high volume or a bullish signal from other indicators (e.g., RSI rising from oversold). This can confirm trend continuation.
◦ Breakout/Reversal: If the price breaks through a Fibonacci level with high volume, it may indicate a continuation of the trend. If it fails to break through and reverses, it may signal a trend reversal.
◦ Example Scenario: If BTC/USDT rallied from $40,000 (swing low) to $50,000 (swing high) and pulls back to the 61.8% Fibonacci level at $44,000, and RSI(6) is at 25 (oversold) with high volume, it suggests a potential bounce, indicating a buying opportunity.
7 Make Trading Decisions:
◦ Bullish Setup: If the price pulls back to a Fibonacci level (e.g., 61.8%) in an uptrend, bounces with high volume, and shows a bullish signal (e.g., Stochastic %K crossing above %D in oversold), consider a buy opportunity. Set a stop-loss below the Fibonacci level.
◦ Bearish Setup: If the price rallies to a Fibonacci level (e.g., 50%) in a downtrend, stalls with high volume, and shows a bearish signal (e.g., MACD bearish crossover), consider a sell or short opportunity. Set a stop-loss above the Fibonacci level.
◦ Breakout Trade: If the price breaks through a Fibonacci level (e.g., 38.2%) with high volume and a rising ADX (above 25), consider a trade in the direction of the breakout. Set a stop-loss below the broken level.
◦ Confirmation: Use Fibonacci Retracement with other indicators (e.g., EMAs, RSI, Volume) to confirm signals. For example, a bounce off the 61.8% level with a rising OBV and price above the EMA(50) is a strong buy signal.
⛔️Additional Notes
• Choosing Swing Highs/Lows: The accuracy of Fibonacci levels depends on selecting significant swing highs and lows. Use recent, clear peaks and troughs for the best results.
• False Signals: Fibonacci levels are not foolproof and can fail in choppy markets. Always confirm with other indicators (e.g., Bollinger Bands, Stochastic) to avoid false signals.
• Binance App Tip: You can add multiple Fibonacci Retracement drawings on the same chart (e.g., for different swing highs/lows) to identify overlapping levels, which often act as stronger support/resistance. Save your chart settings for quick access in future trades.
This is a quick guide to using Fibonacci Retracement on the Binance mobile app. Stay tuned for the final educational post on the Ichimoku Cloud! ✅ 🙏🏼 Happy to answer any questions about Fibonacci Retracement and how to use it 🙏🏼
