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Levels of support and resistance - this is one of the most important tools in the arsenal of any trader.
Support is a threshold below which price does not want to fall. Think of it as a floor.
Upward price action will typically approach a resistance level and then retrace to a lower level before retesting the resistance level again.
In the 13th century, Leonardo Fibonacci introduced to the world a sequence of numbers, where each successive number is the sum of the two previous ones. The ratio of any number of the sequence to the previous one is approximately equal to 1.618.
There is one more regularity: if any member of the Fibonacci series is divided not by the next number, but by the second number after this one, then we get a ratio close to 0.382.
If we take the third term of the series after the original, the ratio between them will be approximately 0.236.
Based on these dependencies, Fibonacci levels were created, with the help of which it is possible to analyze and predict the dynamics of various financial instruments.
Fibonacci levels allow the trader to determine possible correction targets, as well as strong levels of resistance and support.
The key levels are considered to be 38.2%, 50%, and 61.8% Fibonacci levels. These levels provide the greatest resistance and support for course changes.
Using Fibonacci levels, you can determine not only possible correction targets but also possible targets in case of continuation of the trend - it is 161.8%, 261.8%, and 423.6% Fibonacci levels