How to use the Fibonacci trading strategy effectively in the Crypto market is what many investors are looking for. Choosing the right Fibo points to apply to technical analysis will help investors trade more accurately. Fibonacci retracement helps investors track price reversal points on the chart of cryptocurrency pairs. In the article below, Crypto Trading will share the most detailed information about this indicator!
Learn more about Fibonacci trading strategy in Crypto
Investors often use the Fibonacci time zone indicator to determine buying and selling points and price targets when entering the Crypto market.
What is the concept of the Fibonacci sequence?
An infinite series of numbers starting with 0 and 1 is the starting point for the Fibonacci series. They are a series of numbers where the next number is equal to the sum of the previous two numbers. The series of numbers 0,1,2,3,5,8,… is a typical example when talking about Fibonacci. This series of numbers also gives rise to the term golden ratio. 1.618 is the series of numbers that results if an investor takes the ratio of any two consecutive numbers in the series. This is considered an index of the golden ratio. The higher the two consecutive numbers, the more accurate the golden ratio on the chart will be.
The most typical application of the Fibonacci trading strategy in the Crypto market is the Elliott wave theory and the Gartley pattern. Therefore, after oscillations, resistance, and support levels often form at or near the main Fibonacci lines. Fibonacci levels are used to identify reversal zones. The price reaction at each level reflects the importance of Fibo. Investors use these lines to assess support levels and price reversal points in the market.
Calculation formula for Fibonacci trading strategy
Up to now, there is no fixed formula for the Fibonacci sequence. However, instead, there are series of numbers that are closely correlated with each other. After there is a breakout above the Fibo line, the price is confirmed. To be able to apply these, investors need to clearly understand the Fibo points when drawing on the Crypto chart.
See more: Fibonacci: magic trading tool for every trader
Fibonacci trading strategy tools in the market
Currently, in the Crypto market, there are two types of Fibonacci trading strategies that investors can encounter. The first is Fibonacci retracement and the second is Fibonacci extension. Each type of Fibo will have different characteristics and ways of applying in the market.
Learn About Fibonacci Retracement in Crypto
Fibonacci retracement is called Fibonacci retracement (FR) in English. Investors should consider using Fibonacci and drawing Fibonacci in an uptrend. Because at this time, the price is not always as predicted in an uptrend. At this time, investors should determine support and resistance levels through Crypto charts. These levels should be where the price stops correcting down and moves up.
Investors can also apply this to downtrends in the market. The Fibonacci retracement ratio series includes 0.236; 0.382; 0.5 and 0.618;… Of which 0.382 and 0.5 are important levels to watch for. Compared to 0.236 and 0.764, 0.382 and 0.5 have a higher probability of reversal. These ratios are also considered advanced support levels. However, in a downtrend market, these are not just resistance levels. When using FR, investors must follow the principles to get good position entry points and minimize risks.
Learn about the Fibonacci extension sequence
Fibonacci number sequence in English are called Fibonacci extensions (FE). FE is a tool that helps investors decide whether to take profits or cut losses. Fibonacci extensions help determine the price levels that the trend can reach. In other words, they determine the limits of the main trend after the correction ends. Fibo extensions work best when used in trading zones that have been retracement.
In an uptrend, the Fibonacci extension trading strategy is determined by the lower part of the chart area. However, when you use the Fibo extension form. The profit-taking point on the chart is usually between 0.618 and 1.618. Levels below 0.618 are not usually used because the profit is limited. However, levels above 1618 are unlikely to occur because they usually occur in a long-term uptrend or downtrend in the Crypto market.
In practice, when using the Fibonacci trading strategy, investors need to adjust to suit different signals. Some signals are price gaps, peaks, and valleys, or moving averages. Investors start moving to the price range from high to low. Then find the appropriate entry point after comparing it with historical prices. The most reliable reversal signals appear when Fibonacci levels coincide or are close to other technical factors.
What is the Fibonacci sequence drawing and application guide?
Applying the Fibonacci trading strategy requires investors to correctly identify the drawing point. If the identification is wrong, investors are likely to lose money.
How to draw a Fibonacci trading strategy in an uptrend
How to draw a Fibonacci trading strategy in an uptrend will be more complicated than Fibo retracement. When drawing Fibo in an uptrend, investors need to identify 3 price points on the chart. First, investors need to determine the time frame they want to draw. If the time frame is larger, the trading strategy will be longer. Then determine the highest price along with the lowest price in that time frame. Finally, predict the price will be recovered if the price reaches the highest area.
How to Draw and Trade Effectively with Fibonacci Retracements
Reversal signals in the market can be identified through the Fibonacci trading strategy indicator. Investors can fully understand which trend the market is in. However, to get this information, it is necessary for investors to draw the correct Fibo starting point and Fibo ending point.
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If either of these points is wrong, it will lead to a possible loss. Investors start charting by zooming out on the Crypto chart and looking for the longest trend. The first three ratios act as compression zones and when the price hits the threshold, the price will rebound. If the trend is short-term, investors should add lines to the time frame. Once drawn, investors will see that they are closely connected to each other. The intersection of these lines is the support and resistance levels.
Conclude
Above is detailed information about the Fibonacci trading strategy in the Crypto market for investors. The use of this indicator tool is applied by many investors when trading cryptocurrency pairs. However, investors also need to be careful when applying them. For new investors, you can use a demo account to apply Fibonacci before using it for a real account. Don’t forget to follow Crypto Trading to gain more knowledge about this indicator!
FAQs
In the Crypto market, what is the main role of the Fibo tool?
They help investors identify support and resistance levels when trading.
Can Fibo be used in a sideways trend?
The Fibonacci tool can only be applied when the investor clearly identifies the market trend.
What are the advantages of the Fibo tool in the Crypto market?
They are highly flexible. And can give accurate pivot point probabilities.
