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# Fibonacci Retracement Explained - Fibonacci Trading Strategy

Welcome to this article on Fibonacci retracement levels. This article explains everything about Fibonacci retracements, golden ratio, Fibonacci trading strategy and also a Video which gives step by step explanation on how to trade Fibonacci retracement, setting stop loss, and take profit using Fibonacci.

Fibonacci is a very powerful tool for anyone as a trader as it helps in predicting the next move in trending direction.

Fibonacci is popularly used among both beginners and experienced traders which is called Fibonacci trading. If You understand Fibonacci retracements well, then you can easily derive a Fibonacci trading strategy which can be both accurate and profitable.

Fibonacci retracement levels are nothing but the horizontal lines that represent the change in price in terms of percentage. In an uptrend Fibonacci is drawn from low to high (a price low is 0 and the price high is 1) and vice versa for downtrend

These lines between high and price low are called the Fibonacci retracements!

Technically, There is no formula for Fibonacci, they are just horizontal lines and purely depend on the price low, price high that you consider.

Normally fibonacci retracements consists of the following levels,

1. 0.236 / 23.6%

2. 0.382 / 38.2%

3. 0.500 / 50.0%

3. 0.618 / 61.8%

Theoretically speaking,

Whenever there is an impulse move in a trending direction, the price is expected to retrace back, it is expected to experience a pullback until 0.618 Fibonacci retracement level.

However, in real markets prices tend to retrace up to 0.236 fib retracement level, That is why it's important to observe price action at any particular retracement level

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