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  • #5327
    EQSIS
    Keymaster

    How do we use Fibonacci retracement to identify support and resistance zone?

    #5799
    Abirami Duraisamy
    Participant
    Rank: Level 5

    In trending market, the fibonacci number sequence can be used to forecast on the likely depth of the retracement positions in the trend and will hint on where the correction can likely to happen. The fibonacci ratios  and analysis can be used in addition to the technical analysis to confirm the outcome of the analysis but can not be used as stand alone tool.

    Fibonacci series: 1,1,2,3,5,8,13,21,34,55,89,144,233,.. The most often used ratios are 61.8( which is the ratio with next no, 144/233, 89/144), 38.2(the ratio with one number forward 89/233,55/144 etc) and the medium value of 50.  When a straight  line is drawn between previous bottom and top and it is considered as 0 and 100%. When the trend is bullish, the resistance is likely to happen at the 38.2 or 50 or at 61.8 % levels for retracement and then the trend will continue in the forward direction. Similarly in bearish trend, the support zone likely to appear at 38.2 or 50 or at 61.8% level from initial low/high positions for retracements. This can be used for all the timelines(daily, monthly, weekly) analysis but along with other analysis.

    #6508
    bhavani
    Participant
    Rank: Level 7

    Fibonacci retracement uses horizontal lines to indicate support and resistance. These are created by drawing the trend line and dividing them by fibonacci ratios.

    #6528
    V.VEDANAYAGAM
    Participant
    Rank: Level 5

    FIBONACCI RETRACEMENT is based on Fibonacci ratios namely 61.8%, 38.2%, 23.6% (which are arrived by his series 0 1 1 2 3 5 8 13 21 34 55 89 144..up to infinity in which the (from the third) number in the series is the sum of two numbers in the left and 61.8% is the % arrived by any number in the series divided by its next right side number in the series EX 13/21 or 55/89etc and 38.2% is the % arrived by any number in the series divided by its second number at the right side in the series EX 21/55 or 55/144 etc and 23.6% is the % arrived by any number in the series divided by the third number at the right side in the series EX 21/89 or 34/144 etc)
    FIRST OF ALL draw the horizontal lines regarding the SUPPORT level and RESISTANCE level of the stock by noting SUPPORT as 0% and RESISTANCE as 100%
    NOW draw horizontal lines with respect to FIBONACCI RATIO s 23.6% ,38.2%, 61.8%
    IN THE BULL TREND
    IF THE PRICE MOVES UPWARD AND CROSSES ABOVE 23.6% then it is the SUPPORT and the next RESISTANCE is at 38.2% LEVEL
    if the price still moves UP and crosses ABOVE 38.2% level then it is the SUPPORT and the next RESISTANCE IS at 61.8%
    IN THE BEAR TREND
    IF the price goes down the 61.8% then this is the RESISTANCE and the SUPPORT is at 38.2% level
    IF the price goes down the 38.2% then this is the RESISTANCE and the SUPPORT is at 23.6% level
    THESE ratio s cannot be used independently without technical analysis
    NOTE some people use 50% and 78.6% levels also to find support and resistance

    #6635
    khushi
    Participant
    Rank: Level 5

    Fibonacci retracements is potential retracements of financial assets original move in prices. Fibonacci retracements uses horizontal lines to identify support or resistance. these levels are created by drawing two trend line to two extreme and dividing the vertical distance by the key Fibonacci retracement.

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