The Fibonacci sequence is a name for mystical sequences of numbers and the perfection of nature. It not only fascinates mathematicians but has also become a powerful tool for financial traders across the globe. Trading Fibonacci emerged as a beacon, helping traders navigate and make wise decisions. Smart traders also find the correct entry point and order. Not only that but also better understand the structure of the market. Let’s explore the Crypto Trading article below to turn simple numbers into powerful tools.
Overview of Trading Fibonacci
Trading Fibonacci can tell you the concept and reasons why you should use Fibonacci. Besides, it is considered a support tool for you to confidently participate in the cryptocurrency market.
What is Fibonacci?
The Fibonacci number sequence is used by investors to predict potential prices of financial assets. The most popular tool built on the Fibonacci sequence is the Fibonacci retracement level. The purpose of this tool is to identify potential support and resistance zones. This determination is said to have the ability to influence future price trends.
Use Fibonacci on Crypto Trading as a support tool
Although Trading Fibonacci is not perfect in predicting trends or identifying reversal points, Fibonacci Trading is still a useful supplementary tool for traders because:
- Trend confirmation: Trading Fibonacci can help confirm trends identified by other trading systems such as RSI, price patterns, etc.
- Measure the level of correction: Fibonacci Retracement helps measure the level of potential correction in the current trend.
- Providing entry/exit points: Fibonacci can provide potential entry/exit points based on identified support levels.
- Increase the probability of success: Fibonacci gains are made possible by trades by providing more information. From there, to confirm the trend and determine appropriate entry/exit points.
- Capital management: Trading Fibonacci is used to identify potential profit-taking points, helping traders control risk and maximize profits.
See more: Fibonacci: magic trading tool for every trader
3-step guide to planning Crypto Trading with Fibonacci
Three basic steps to plan crypto trading with Fibonacci include: Identifying the trend of the Fibonacci series; Determining price levels A and B as a basis for setting the Fibonacci series price measure and using Trading Fibonacci to determine price levels C and D.
What is the trend of the Fibonacci sequence?
Waiting time will depend on the time frame you choose. The larger the time frame, the longer the wait.
Some basic steps to identify the trend in the corresponding time frame:
- Determine the trading time frame Trading Fibonacci: Choose the time frame that suits your trading style and investment goals.
- Choose a Fibonacci system: Use a trading system suitable for the selected time frame.
- Price chart analysis: Use technical indicators and price analysis methods. This helps identify current and potential trends within the selected time frame.
- Trend confirmation: Combine multiple indicators and analysis methods to increase the reliability of trend predictions.
- Plan a Trading Fibonacci trade: Based on the identified trend, build an appropriate trading strategy, including entry/exit points, capital management, and stop loss.
Determine price levels A and B as a basis for setting the Fibonacci series price measure
Price levels A and B play an important role in determining potential support and resistance levels using Fibonacci Trading. The way the two prices are determined varies according to the Fibonacci system.
Some general principles for determining A and B prices:
- Price level A: Usually the highest level in a specific price trend. Represents the beginning of a psychological bout (fear, excitement) in the market.
- Price level B: Usually the temporary lowest level in the current price trend. Represents the temporary end of the psychological crisis that is dominating the market.
For example:
- Price level A: Bitcoin price just set a new ATH and then turned down sharply. This triggers fear in the market.
- Price level B: RSI bottom divergence has appeared. This shows the possibility that price B is where fear temporarily subsides.
Use Trading Fibonacci to determine price levels C and D
After determining price levels A and B, the Fibonacci Retracement tool can be used. This tool supports predicting potential price ranges for C and D.
How to use Trading Fibonacci to determine price levels C and D:
- Drag the line Retracement Fibonacci from B to A.
- Observe the Fibonacci levels displayed on the chart.
- Price level C: Usually predicted at Fibonacci levels 0.618 and 0.382. This level serves as a potential profit-taking target. Because then, the buy transaction is made at B based on the divergence signal.
- Price level D: Determined by the Fibonacci extension level at 1.618, suggesting the main trend AB continues.
See more: Instructions for opening an MEXC global account
Rules for applying Fibonacci Trading in Crypto
Apply Fibonacci to Fibonacci Retracement and Fibonacci Extension. These are two popular tools used in trading to predict potential price levels. However, Fibonacci retracement and extension have the following differences:
Fibonacci Retracement:
- Purpose: Measure the temporary retracement of price compared to the main trend.
- How to use: Drag the Fibonacci line from the highest level (peak) to the lowest level (bottom) in the current trend. Commonly used Fibonacci levels include 0.382, 0.50, 0.618, 0.786.
Fibonacci Extension:
- Purpose: Measure the continuation of the main trend.
- How to use: Drag the Fibonacci line from the highest level (peak) to the lowest level (bottom) in the current trend. Then extend this line to the Fibonacci levels. Commonly used Trading Fibonacci levels include 1.618, 2.618, 4.236.
In an uptrend: Price level C (Fibonacci Retracement) can be a potential profit-taking target. Because at this time the purchase transaction is made at price level A. Price level D (Fibonacci Extension) can be a potential profit-taking target for the purchase transaction. Because, it is done at price level C in this trend.
In a downtrend: Price level C (Fibonacci Retracement) can be a potential entry point for a sell transaction made at price level A. Price level D (Fibonacci Extension) can be a potential entry point for a trade The sale is made at price C.
Conclude
Looking back at our journey of discovering the power of Trading Fibonacci, we clearly see that these golden ratios are not just dry numbers but the key that opens the door to a deep understanding of market behavior. Fibonacci is an indispensable companion. Because this is a reliable and effective trading method and a reputable choice. Follow Crypto Trading articles to apply to your strategy.
FAQs
What is the Fibonacci ratio in Crypto trading?
Fibonacci ratios play an important role in the technical analysis of financial markets, including Crypto. It is used to identify potential support and resistance levels, thereby helping traders make more informed buying or selling decisions.
Why is the Fibonacci ratio loved by investors in Crypto trading?
Easy to apply, even for trading beginners. Able to accurately predict support/resistance zones compared to other price measurement methods.
The best Crypto trading platforms today in the UK?
BingX, Airdrop M2, Coinrule, Exodus, BYDFi.
