Fibonacci Crypto Trading: Fibonacci Retracement Levels And Extensions Explained

moving average

Combining more than one trading technique can increase the chances of a reliable trade setup. For example, a simple moving average works well together because both indicators work best in a trending market. Most price retracements are expected to fail at the 61.8% Fibonacci level. The 61.8% fib level is known as the golden ratio because every number in the Fibonacci sequence is 1.618 times the prior number; therefore, this level carries a lot of weight.


While not a Fibonacci ratio, 0.5 is also an important retracement level, while 0 and 1 serve as anchors of the Fibonacci retracement tool. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate.

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Therefore, it cannot be reliably used as the sole technical indicator. While the choice of ratios may vary from trader to trader, the most common Fibonacci ratios used in market analysis are 23.6%, 38.2%, 50%, 61.8%, and 78.6%. First, drawing the Fibonacci retracement level relies on swing high and low points.

When the price reaches one of these levels, we expect that either a trend continuation or reversal will occur. The two additional levels of 50% and 76.4% are added by traders, even though they aren’t provided by the Fibonacci formula. This is because, historically, price trends tend to find support and resistance at these levels as well. Consequently, adding them to the Fibonacci levels on your chart can provide further insight for market entries or exits. Many crypto traders use the Fibonacci retracement tool to check for possible places where a price pullback may find support or resistance. A pullback, also known as a retracement, is a temporary reversal in the crypto market trend.

During the last 24 hours, the BTC/USD pair has dropped nearly 1.5%, while CoinMarketCap currently ranks first with a live market cap of $346 billion, down from $350 billion yesterday. It has a total supply of 21,000,000 BTC coins and a circulating supply of 19,216,412 BTC coins. Fibonacci cryptocurrency trading can be an effective, low-risk and high profit strategy for trading any asset, but especially cryptocurrencies. Refer to the specific examples above to see how Bitcoin and Ethereum respond to Fibonacci retracement levels.

#4 Fib Confluence with Simple Moving Averages

One of the most commonly used and also highly misunderstood technical indicators is the Fibonacci Retracement. While it can be very effective in deciding entry and exit positions in a market, it can also be very risky if not properly used. It is mostly used by advanced traders who have mastered the patterns and can use them efficiently to their advantage, but you can learn about it too. The Fibonacci retracement golden pocket level is another interesting strategy to have in your technical analysis toolset.

Market trends are more accurately identified when other analysis tools are used with the Fibonacci approach. As discussed above, there is nothing to calculate when it comes to Fibonacci retracement levels. The percentage levels provided are areas where the price could stall or reverse. Fibonacci retracement levels connect any two points that the trader views as relevant, typically a high point and a low point. Fibonacci retracement levels were named after Italian mathematician Leonardo Pisano Bigollo, who was famously known as Leonardo Fibonacci.

  • All the ratios, except for 50% , are based on some mathematical calculation involving this number string.
  • Litecoin has gained more than 1% in the last 24 hours, but its weekly gain is more than 23%.
  • Because for the opportunity to realize , two things still need to happen.
  • When it doesn’t work out, it can always be claimed that the trader should have been looking at another Fibonacci retracement level instead.
  • That said, crypto Fibonacci retracements on longer timeframes will present stronger trend indicators than those on shorter timeframes.

The Ethereum price chart below shows different instances of price uptrend, reversal, and continued uptrend within the 24hrs timeframe. Reversal repeatedly extends below the former peak before going ahead to create new uptrends and new peaks in some cases. Unfortunately, estimating the golden pocket isn’t as straightforward as the reversal points which can be easily seen in the chart.

In other words, in an uptrend, you should draw the Fibonacci line from the low of the last relevant swing to its high. You only need to choose low and high price swings relevant to your analysis and the price at which you are trading. Similarly, according to a previous Finbold report, BTC is currently in an “extreme long-term hodler accumulation zone by considering Bitcoin’s historical price analysis”. First, there is no way to know which exact Fibonacci extension level will provide resistance. Price then reversed as sellers jumped back in, and brought price all the way back down to the Swing Low.

These levels are often used to identify entry and exit points, or to decide where to put a trigger for stop orders. These are automatically executed when a certain price is reached, preventing significant losses in the process. Unlike with chart patterns or emerging patterns that can be straightforward opportunities to trade, with Fibonacci patterns they really are just an early warning signal.

More importantly, you will fibonacci crypto to apply the automatic Fibonacci retracement tool using real-world Fibonacci retracement examples in crypto markets. The chart above shows that the price bounced off the trend line multiple times. Let’s imagine a case where the trader is unsure if the trend line would continue to serve as resistance before the third bounce in the picture above. The trend line has a confluence with a strong Fibonacci line would have propelled more confidence into the trader to execute the trade. The trend continuation that followed would not have come as a surprise.

AI predicts Cardano (ADA) price for the end of 2023

However, GoodCrypto is much more than just a free tool for drawing Fibonacci trading ratios. It’s worth noting that the 0.618 ratio is particularly important for trading with Fibonacci retracements. It is called the “golden ratio” and traders often consider it as a major trend support/resistance level.

Another problem is defibonacci cryptoining which Swing Low to start from in creating the Fibonacci extension levels. A couple of days later, the price rallied yet again before finding resistance at the 161.8% level. These numbers, of course, aren’t directly plotted to a price chart. But the levels used in the Fibonacci retracement tool are all derived from these numbers in some way. Your golden pocket line stretches to the price levels, which allows you to identify the price level for the set point. In between these levels is another equally important phenomenon in crypto trading.

Bitcoin Price and Ethereum Prediction: Can BTC’s 61.8% Fibonacci … – Cryptonews

Bitcoin Price and Ethereum Prediction: Can BTC’s 61.8% Fibonacci ….

Posted: Sun, 26 Feb 2023 06:25:00 GMT [source]

Choosing the two points must be done carefully to get an accurate measurement. In an uptrend, you must attach the tool to the lowest relevant price of the low swing and connect it to the highest relevant price of the high price swing. Conversely, you must connect it to the last trend’s highest and lowest relevant prices in a downtrend. As simple as this may seem, not doing it accurately will give you the wrong result.

ETH Example: Does Ethereum Follow Fibonacci Retracement Levels?

CoinDesk unpacks and explains Fibonacci retracements, a tool used to predict potential price support and resistance, for crypto traders. When you think of popular cryptocurrency trading tools, the Fibonacci retracement level tool is right there at the top of the list. Helping traders reveal key levels to place buy and sell orders is a very simple way to explain the purpose of this highly effective tool and doesn’t entirely do it justice. The information you get from the retracement levels will help you determine possible support and resistance points, and what you do with such data depends on your trading strategy. The sell-off intensity is expected to meet a brief halt after the first 20-25% drop. Traders have identified certain important levels in asset price development.

Understanding Fibonacci Retracement Levels in Crypto – The News Minute

Understanding Fibonacci Retracement Levels in Crypto.

Posted: Wed, 22 Feb 2023 11:07:22 GMT [source]

In this trading guide, we’re going to share some of the most powerful techniques for building a trading strategy using the Fibonacci retracement tool. When it comes to crypto trading, investors are always seeking a competitive edge. They will draw trend lines to form chart patterns, turn on a series of technical indicators, or anything else they can do to gain even the slightest advantage.


The Fibonacci retracement tool draws retracement levels between the swing high and swing low. Fibonacci Retracement is a technical indicator that if used properly can definitively tell a trader when to enter and exit a market with very little chance of losing. Though many find it confusing, it can be very profitable if used correctly in the right scenario. The second condition is that it must be used with other indicators such as Relative Strength Index . The RSI confirms where the asset has been overbought and dropped in price which gives the assurance that a bounce is likely. Without such a complimentary indicator, Fibonacci Retracement alone can be misleading and can cost you your capital.

Litecoin has gained more than 1% in the last 24 hours, but its weekly gain is more than 23%. CoinMarketCap is currently ranked 13th, with a live market cap of $5.5 billion. The BTC/USD pair is currently descending towards a 38.2% Fibonacci retracement level of $16,300. On the 4-hour timeframe, it has already crossed below the 50-day moving average line, indicating a selling bias. TheFibonacci sequence is a set of numbers that includes a certain pattern like, 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc.

  • The series is derived by adding the two contiguous numbers to form the next one.
  • Once those two points are chosen, the lines are drawn at percentages of that move.
  • These levels are often used to identify entry and exit points, or to decide where to put a trigger for stop orders.
  • These levels are inflection points where some type of price action is expected, either a reversal or a break.

The simple https://www.beaxy.com/ average is a great tool to determine dynamic support and resistance level that, when aligned with a Fib level, it can provide profitable trade setups. Fibonacci levels crypto can be drawn using the Fibonacci retracement drawing tool offered for free as part of the suite of Margex technical trading tools. In the settings, users can toggle which Fibonacci retracement or extension levels they want to have visible. The static nature of the price levels allows for quick and easy identification. That helps traders and investors to anticipate and react prudently when the price levels are tested. These levels are inflection points where some type of price action is expected, either a reversal or a break.


Because for the opportunity to realize , two things still need to happen. It can reach the level before or after the dot, as long as it is on that level. Second thing that needs to happen is that price should encounter support or resistance at the level of the dot, depending on whether it is a bullish or bearish pattern. Only if the price reaches this level and turns around at this level, then the expectation is that there will be support or resistance at the Fibonacci levels that follow. Fibonacci retracements and extensions plot possible levels of support and resistance.

Another tool crypto traders can use is called the Fibonacci retracement tool. It is used to project Fibonacci ratios at key retracement or extension targets which can be used to find potential support or resistance levels. Like every other technical indicator, Fibonacci retracements also have some flaws and you should be aware of them before using this indicator to invest your capital in the financial markets. Thefirst disadvantage is that this indicator isn’t objective, which means that it works well only for some assets. For Fibonacci retracement to work in the market’s favor, a significant amount of traders have to use the same Fib ratios, which will then reflect in the price momentum LTC of the asset as well.