Crypto Trading with Fibonacci Retracement Levels
Cryptocurrency trading has exploded in recent years, and as a result, crypto traders are constantly on the lookout for new and innovative techniques to get ahead of their competition. One technique that has been gaining traction in recent years is utilizing Fibonacci Retracement levels to forecast and act upon crypto price movements. By understanding and utilizing these tools, traders can identify profitable trading opportunities and increase their profits.
What is Fibonacci Retracement?
Fibonacci Retracement is a technical analysis tool that is used to identify potential levels of support and resistance in the market. The theory behind this tool is that certain Fibonacci ratios reoccur in nature and in the financial markets, offering traders an insight into reliable price points near which the market is likely to interact with. For this reason, any price level corresponding to a Fibonacci ratio can offer a trader clues as to whether a market is about to reverse, or if a strong trend is likely to continue.
Fibonacci and Crypto Trading
Fibonacci Retracements can be used in many asset classes, but they are especially useful in crypto trading where the high degree of volatility provides ample opportunity for traders to take advantage of potential reversals. Using a Fibonacci Retracement tool, traders can identify when prices are reaching the 50, 61.8 and 78.6% retracement levels, which indicate potential support and resistance points. When a price is reaching a Fibonacci Retracement level, traders can look for opportunities to enter or exit their positions for potential gains.
Using Fibonacci with Crypto Charts
In order to use a Fibonacci Retracement tool for crypto trading, traders must first properly calculate support and resistance levels on the chart. This is done by selecting two points on the chart that represent a high and a low. The Fibonacci Retracement tool will then automatically draw horizontal lines at the 23.6, 38.2, 50, 61.8, and 78.6% price retracements of the original movement. Traders can then use these levels to identify potential entry and exit points.
Conclusion
Fibonacci Retracement tools may seem complex and difficult to use at first, but when used correctly they can be an invaluable asset to crypto traders. By understanding how to properly utilize these tools, traders can identify reliable support and resistance levels and use them as springboards for generating profits. As with any trading methodology, however, it’s important for traders to remember to trade responsibly and follow prudent risk management practices.