Currently, there are many indicator tools applied in trading on the market, but the Fibonacci pattern is still one of the most popular indicators today. Fibonacci supports investors in determining support resistance zones. It also helps investors find more reliable entry points. Theoretically, the Fibonacci sequence is a great indicator in the Crypto market. However, not all investors know how to use it. Let’s learn more about the Fibonacci sequence with Crypto Trading!
Things to know when using the Fibonacci pattern
Leonardo Fibonacci invented the Fibonacci pattern technical analysis tool in the 13th century. Until now, this is still an indicator that many investors prefer to use. Investors should note that, up to now, there is no fixed Fibonacci formula in the market.
What does the Fibonacci pattern mean?
Since its inception and use to identify important levels in price cycles, the Fibonacci effect has played a very important role in the price movements of the cryptocurrency market. Currently, in the cryptocurrency market, Fibonacci retracement is the most widely used tool. One of the main reasons is its simplicity and easy application to all different cryptocurrency pairs. Their applications in technical analysis can include identifying resistance levels, and support levels, or helping investors determine stop loss points and place price positions.
What to note when using the Fibonacci pattern to trade Crypto
Similar to other technical analysis indicators. Fibonacci sequence is not always accurate although important levels can be predicted by Fibonacci. Choosing the period to draw Fibonacci lines and determining the lows and highs of the market is not easy. Every investor has different views and opinions on stock analysis. Investors should practice their skills and understand how to use Fibonacci.
This will help investors master this tool and thereby improve their trading experience. The Fibonacci pattern is a powerful technical analysis tool. However, investors should use it in combination with other tools such as trend lines. Or combine it with support, resistance, and Elliott waves to increase trading efficiency. Fibonacci is said to have too many price resistance lines. Because of this, the prices of cryptocurrency pairs often fluctuate between these resistance lines. They make it difficult for investors to determine effective resistance levels.
See more: Fibonacci: magic trading tool for every trader
Types of Fibonacci trading that investors may encounter
In the Crypto market, there are two types of Fibonacci patterns that investors will often encounter: Fibonacci retracement and Fibonacci extension. There are also other types of Fibonacci such as Fibonacci arc, Fibonacci fan, etc.
Fibonacci retracement levels when trading
Fibonacci retracements help traders identify price levels where prices are likely to reverse. With Fibonacci retracements, traders determine whether the trend is up or down. If it is an uptrend, it is just a temporary decline and is likely to continue rising. Fibonacci retracements help traders identify this temporary point and trade.
When using Fibo retracement levels, investors must follow the principles to get good entry points and minimize risks. The Fibonacci pattern retracement has main levels including 0 – 23.6; 38.2; 50; 51.8; 76.4; 100. These Fibo levels are symmetrical to each other, adding up to 100. Elliott Wave and Gartley’s model are two typical applications of the Fibonacci pattern indicator. Price reaction at each level will reflect the importance of the Fibonacci indicator at that level.
Trading Fibonacci Extensions in Crypto
Fibonacci extensions are best used when used from Fibonacci retracement ratios. In an uptrend, Fibonacci pattern extension levels are determined by the lower part of the chart range. And they continue until there is a breakout. Traders who want to use Fibonacci extensions need to reverse this process. Then, traders can mark the bottom of the range.
Continue to draw a new line on the Crypto chart. You can completely expand it further until the ratio is sufficient. However, investors when using the Fibonacci pattern to make a profit should note that the profit level needs to be between 0.618 and 1.618. Levels below 0.618 will be limited in use. Because the probability of making a profit at this level is not high. As for levels above 1.1618, they will rarely appear. Because this is the level that can be 90% sure to make a profit when trading.
Fibonacci pattern and application when trading Crypto
Fibonacci pattern helps investors to identify resistance levels whether in an up or down market. Investors should note that when using the Fibo indicator, finding the right drawing point is very important.
The Fibonacci sequence determines support resistance levels
With the Fibo retracement tool, investors can completely identify potential reversal points in the market. The condition to apply is that investors need to identify the current trend of the market. To be able to find the support resistance level, investors need to draw 2 extreme points for the two lines. One line is drawn from the bottom connecting to the top and one line is drawn in reverse.
With an uptrend, the trader needs to start drawing the measuring line from the lowest point. Extend the measuring line until it touches the highest point of the trend segment. At this point, the Fibonacci levels will start to appear one after another. With a downtrend, the trader does the opposite of the uptrend when finding the drawing point.
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The Fibonacci effect determines buy and sell points
Determining buying and selling points on Crypto charts will be safer when investors combine them with other indicators. Combining indicators is one of the ways to increase reliability when determining buying and stop-loss points. With the Fibo tool, investors can only know the stop-loss point or the price reversal point. To know the appropriate buying point, investors can combine support and resistance lines or Japanese candlestick patterns.
Conclude
Through the above information, investors can see that Fibonacci pattern play an important role in technical analysis in the Crypto market. They can help investors identify selling points when in a downtrend. At the same time, they also help investors find the best profit-taking points. However, to apply this tool, investors need knowledge as well as experience with the market. To be able to learn more about the types of technical analysis indicators. Don’t forget to follow Crypto Trading every day!
FAQs
Is Applying the Fibonacci Pattern Tool Sure to Win in the Crypto Market?
No tool can bring certainty to the market. They only help investors increase their confidence when trading.
Does using Fibo affect the trend prediction?
Incorrect trend prediction will cause the Fibo tool to be incorrect. And will not give correct results when trading.
Is Fibonacci in the Crypto Market a Prediction Tool?
In Crypto Markets, the Fibonacci Sequence is a Metric, Not a Trend Predictor
