The Fibonacci Tool is a popular technical analysis tool used by traders to identify potential support and resistance levels on price charts. It is based on 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, 21, etc.). In trading, this tool helps predict points where the price may pause, reverse, or continue its trend. Here's a detailed explanation:What is the Fibonacci Retracement Tool?The Fibonacci Retracement is the most common Fibonacci tool. It identifies potential retracement levels within a price trend. The key retracement levels are:23.6%38.2%50% (not a true Fibonacci ratio but widely used)61.8% (known as the "golden ratio" due to its relation to the golden mean)78.6%These levels are calculated by taking two extreme points on a chart (usually the highest and lowest points of a trend) and dividing the distance between them by Fibonacci ratios.
