Fibonacci Retracement Strategy

Advanced strategy using Fibonacci ratios to identify key support and resistance levels for precise entries and exits

Difficulty

Advanced

Risk Level

Medium-High

Best For

Swing Trading

Timeframe

4h - 1d

What is Fibonacci Retracement?

Fibonacci retracement is a technical analysis tool that uses Fibonacci ratios to identify potential support and resistance levels. These levels are calculated by taking the high and low points of a price move and dividing the vertical distance by the key Fibonacci ratios.

Key Ratios: 0.236, 0.382, 0.5, 0.618, 0.786
Formula: Retracement Level = Low + (High - Low) × Ratio

Fibonacci Retracement Levels

Trading Rules

BUY Signals

1.Price retraces to 61.8% or 78.6% Fibonacci level
2.Additional confirmation from RSI or MACD
3.Volume increases on the bounce
4.Enter long with stop loss below the low

SELL Signals

1.Price rallies to 61.8% or 78.6% Fibonacci level
2.Bearish divergence on momentum indicators
3.Volume confirms the rejection
4.Enter short with stop loss above the high

Real World Example

Live BTC Fibonacci Analysis

24H Range

$42,000 - $45,000

Current Price

$43,200

Key Fibonacci Levels:

78.6% Level: $N/A
61.8% Level: $N/A
50.0% Level: $N/A
38.2% Level: $N/A

Risk Management

Position Sizing

Risk only 1-2% of capital per trade due to advanced nature

Stop Loss

Place below recent swing low or below next Fibonacci level

Take Profit

Target next Fibonacci resistance level or 2:1 reward ratio

Confirmation

Always wait for price action confirmation at Fibonacci levels

Disclaimer

Fibonacci retracement is an advanced technical analysis tool that requires experience and practice. This strategy is for educational purposes only. Fibonacci levels are not guaranteed support/resistance and should be used in conjunction with other analysis methods. Always use proper risk management and never risk more than you can afford to lose.