Differences

This shows you the differences between two versions of the page.

--- chart_analysis:fibonacci_retracemen [2019/06/24 19:38]
127.0.0.1 external edit
+++ chart_analysis:fibonacci_retracemen [2023/07/21 20:51] (current)
jayanthi [Using with SharpCharts]
@@ Line 1: / Line 1: @@
 ====== Fibonacci Retracements ======
-===== Introduction =====
+===== What Are Fibonacci Retracement Levels? =====
-Fibonacci Retracements are ratios used to identify potential reversal levels. These ratios are found in the Fibonacci sequence. The most popular Fibonacci Retracements are 61.8% and 38.2%. Note that 38.2% is often rounded to 38% and 61.8 is rounded to 62%. After an advance, chartists apply Fibonacci ratios to define retracement levels and forecast the extent of a correction or pullback. Fibonacci Retracements can also be applied after a decline to forecast the length of a counter-trend bounce. These retracements can be combined with other indicators and [[:chart_analysis:chart_patterns|price patterns]] to create an overall strategy.
+Fibonacci retracement levels are based on ratios used to identify potential reversal points on a price chart. These ratios are found in the Fibonacci sequence. The most popular Fibonacci retracements are 61.8% and 38.2%. Note that 38.2% is often rounded to 38%, and 61.8 is rounded to 62%. After an advance, chartists apply Fibonacci ratios to define retracement levels and forecast the extent of a correction or pullback. Fibonacci retracement levels can also be applied after a decline to forecast the length of a counter-trend bounce. These retracements can be combined with other indicators and [[:chart_analysis:chart_patterns|price patterns]] to create an overall strategy.
-===== The Sequence and Ratios =====
+===== Fibonacci Sequence and Ratios in Simple Words =====
-This article is not designed to delve too deep into the mathematical properties behind the Fibonacci sequence and Golden Ratio. There are plenty of other sources for this detail. A few basics, however, will provide the necessary background for the most popular numbers. Leonardo Pisano Bogollo (1170-1250), an Italian mathematician from Pisa, is credited with introducing the Fibonacci sequence to the West. It is as follows:
+Fortunately, you don't have to delve too deep into the mathematical properties behind the Fibonacci sequence and Golden Ratio. There are plenty of other sources that go into it in detail. A few basics, however, will provide the necessary background for the most popular numbers. Leonardo Pisano Bogollo (1170-1250), an Italian mathematician from Pisa, is credited with introducing the Fibonacci sequence to the West. It is as follows:
 , 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610......
@@ Line 23: / Line 23: @@
 //....the proportion of .618034 to 1 is the mathematical basis for the shape of playing cards and the Parthenon, sunflowers and snail shells, Greek vases and the spiral galaxies of outer space. The Greeks based much of their art and architecture upon this proportion. They called it the golden mean.//
-===== Alert Zones =====
+===== Fibonacci Retracements as Alert Zones =====
 Retracement levels alert traders or investors of a potential trend reversal, resistance area or support area. Retracements are based on the prior move. A bounce is expected to retrace a portion of the prior decline, while a correction is expected to retrace a portion of the prior advance. Once a pullback starts, chartists can identify specific Fibonacci retracement levels for monitoring. As the correction approaches these retracements, chartists should become more alert for a potential bullish reversal. Chart 1 shows Home Depot retracing around 50% of its prior advance.
@@ Line 35: / Line 35: @@
 Keep in mind that these retracement levels are not hard reversal points. Instead, they serve as alert zones for a potential reversal. It is at this point that traders should employ other aspects of technical analysis to identify or confirm a reversal. These may include candlesticks, price patterns, momentum oscillators or moving averages.
-===== Common Retracements =====
+===== What Are the Common Retracement Levels? =====
 The Fibonacci Retracements Tool at StockCharts shows four common retracements: 23.6%, 38.2%, 50%, and 61.8%. From the Fibonacci section above, it is clear that 23.6%, 38.2%, and 61.8% stem from ratios found within the Fibonacci sequence. The 50% retracement is not based on a Fibonacci number. Instead, this number stems from Dow Theory's assertion that the Averages often retrace half their prior move.
-Based on depth, we can consider a 23.6% retracement to be relatively shallow. Such retracements would be appropriate for [[:chart_analysis:chart_patterns:flag_pennant_continuation|flags]] or short pullbacks. Retracements in the 38.2%-50% range would be considered moderate. Even though deeper, the 61.8% retracement can be referred to as the golden retracement. It is, after all, based on the Golden Ratio.
+Based on depth, we can consider a 23.6% retracement to be relatively shallow. Such retracements would be appropriate for [[:chart_analysis:chart_patterns:flag_pennant_continuation|flags]] or short pullbacks. Retracements in the 38.2%-50% range would be considered moderate. Even though deeper, the 61.8% retracement can be called golden retracement. It is, after all, based on the Golden Ratio.
-Shallow retracements occur, but catching these requires a closer watch and quicker trigger finger. The examples below use daily charts covering 3-9 months. Focus will be on moderate retracements (38.2-50%) and golden retracements (61.8%). In addition, these examples will show how to combine retracements with other indicators to confirm a reversal.
+Shallow retracements occur, but catching these requires a closer watch and a quicker trigger finger. The examples below use daily charts covering 3-9 months. Focus will be on moderate retracements (38.2-50%) and golden retracements (61.8%). In addition, these examples will show how to combine retracements with other indicators to confirm a reversal.
 ===== Moderate Retracements =====
@@ Line 63: / Line 63: @@
 {{:chart_analysis:fibonacci_retracemen:fibo-6-jpm62be.png|Chart 6 - Fibonacci Retracements}}
-===== Conclusion =====
+===== The Bottom Line =====
-Fibonacci retracements are often used to identify the end of a correction or a counter-trend bounce. Corrections and counter-trend bounces often retrace a portion of the prior move. While short 23.6% retracements do occur, the 38.2-61.8% zone covers the most possibilities (with 50% in the middle). This zone may seem big, but it is just a reversal alert zone. Other technical signals are needed to confirm a reversal. Reversals can be confirmed with candlesticks, [[:technical_indicators|momentum indicators]], volume or chart patterns. **In fact, the more confirming factors, the more robust the signal.**
+Fibonacci retracement levels are often used to identify the end of a correction or a counter-trend bounce. Corrections and counter-trend bounces often retrace a portion of the prior move. While short 23.6% retracements occur, the 38.2-61.8% zone covers the most possibilities (with 50% in the middle). This zone may seem big, but it's just a reversal alert zone. Other technical signals are needed to confirm a reversal. Reversals can be confirmed with candlesticks, [[:technical_indicators|momentum indicators]], volume, or chart patterns. **The more confirming factors, the more robust the signal.**
 ===== Using with SharpCharts =====
-You can use our [[docs>chartnotes|ChartNotes annotation tool]] to add Fibonacci Retracement Lines to your charts. Below, you'll find an example of a chart annotated with Fibonacci Retracement Lines.
+You can use our [[https://support.stockcharts.com/doku.php?id=chartnotes|ChartNotes annotation tool]] to add Fibonacci Retracement Lines to your charts. Below, you'll find an example of a chart annotated with Fibonacci Retracement Lines.
 {{:chart_analysis:fibonacci_retracemen:fibo-8-shrpchrt.png|Chart 7 - Fibonacci Retracements}}
-To learn more about how to add this annotation to your charts, check out our Support Center article on [[docs>chartnotes:line_studies#fibonacci_retracement_lines|ChartNotes' Line Study Tools]].
+To learn more about how to add this annotation to your charts, check out our Support Center article on [[https://support.stockcharts.com/doku.php?id=chartnotes:line_studies#fibonacci_retracement_lines|ChartNotes' Line Study Tools]].
+===== Fibonacci Retracement Level FAQs =====
+==== How can Fibonacci retracements be used in trading? ====
+Fibonacci retracements are used to anticipate and respond to potential price reversals in the market. When the price approaches these retracement levels, traders should be alert for a potential bullish or bearish reversal.
+==== Which are the most popular Fibonacci Retracement levels? ====
+The most popular (or commonly watched) Fibonacci Retracements are 61.8% and 38.2%. Sometimes these percentages are rounded to 62% and 38%, respectively. The other two ‘common’ retracements include 23.6% and 50% (though 50% is not part of the Fibonacci sequence).
+==== What is the significance of 1.618 in the Fibonacci sequence? ====
+The number 1.618 refers to the Golden Ratio and is referred to as the 'Golden' retracement. This level is often considered a significant retracement to watch for potential reversals.
+==== What are the "alert zones" in Fibonacci retracements? ====
+Alert zones in Fibonacci retracements refer to the areas where a potential trend reversal, resistance, or support may occur. They help traders identify specific retracement levels to monitor for potential reversals.
+==== How can Fibonacci retracements be combined with other indicators? ====
+Fibonacci retracements can be combined with other indicators such as candlesticks, price patterns, momentum oscillators, or moving averages to create a robust trading strategy and confirm potential reversals.
 ===== Further Study =====
@@ Line 80: / Line 97: @@
 |  [[https://store.stockcharts.com/products/elliott-wave-principle-key-to-market-behavior|{{:chart_analysis:fibonacci_retracemen:store_prechter_elliottwaveprinciple.gif|}}]]  |
 |   [[https://store.stockcharts.com/products/elliott-wave-principle-key-to-market-behavior|{{:store:buynowbuttone.jpg|Buy Now}}]]  |