How to use Fibonacci retracement tools?
Fibonacci retracement lines are very useful in trend analysis for anticipating a pullback or a reversal in price. Pullbacks are made when a new high or low is reached. They are generally considered the riskiest of all trades and most traders are well advised to avoid them, except the most nimble. No market goes strictly in one direction. There are always ups and downs in the price. These fluctuations should be anticipated in advance. As a general rule, after a long trend has been established, it would be normal for 50% of the gains to be erased by a counter-trend move (reversal). After this counter move, the price would resume its previous trend in the same original direction. Since the 50% value isn’t that precise a target, traders bracket the counter move from 38% to 62% giving one 3 targets where the trader can take 1/3 profits at the first target(38%), 1/2 in the second (50%) and 2/3rd in the 3rd target (62%). If the counter trend move crosses this 62% target, then the market is co
