## Fibonacci Retracement: An Indispensable Tool in Cryptocurrency Trading

In the volatile world of cryptocurrency trading, finding the exact entry and exit points is what most traders desire. That is why **Fibonacci retracement** has become one of the most widely used technical analysis tools on exchanges.

## What Is Fibonacci Retracement?

**Fibonacci retracement** is a method that helps traders identify potential **support levels** ( where the price may recover ) and potential **resistance levels** ( where the price may be blocked ). This tool is based on a special mathematical sequence, where each number is the result of adding the two preceding numbers.

Important ratios derived from the Fibonacci sequence (23, 6%, 38.2%, 50%, 61.8%, and 100%) hold significant meaning in market analysis. In particular, **the 61.8% ratio is referred to as the "Golden Ratio"** and is often regarded as the most crucial price level at which the market will react.

## How Does the Fibonacci Sequence Work?

The Fibonacci sequence starts from 0 and 1, then each subsequent number is the sum of the two preceding ones: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34... Although this sequence is not used directly in trading, the mathematical relationships between the numbers in the sequence create extremely valuable ratios. These ratios (23.6%, 38.2%, 50%, 61.8%) become powerful analytical tools for forecasting price fluctuations.

## How to Apply Fibonacci Retracement in Trading Practice

When drawing **Fibonacci retracement** on the price chart, you will:

1. Identify the peak and trough on the chart
2. Draw tools from low to high ( if the trend is upward ) or from high to low ( if the trend is downward )
3. The system will automatically calculate and display important levels.

Practical example: Suppose the price increases from 471.30 USD to 793.86 USD. The Fibonacci retracement tool will calculate that the level of 594.52 USD ( corresponding to the golden ratio of 0.618) may act as an important support or resistance level in the next price adjustments.

## Why Is Fibonacci Retracement Important for Traders?

**Fibonacci retracement** is useful not only in predicting retracements but also in:

- **Determine Entry Points**: The retracement levels indicate price positions that may create good buying opportunities.
- **Set stop-loss order**: Traders can protect their portfolio by placing a stop-loss just below important support levels.
- **Plan to take profit**: Levels such as 38.2% or 61.8% are commonly used by many to decide when to exit a position.

## Combining Fibonacci With Other Tools

Although **Fibonacci retracement** is a powerful tool, to achieve higher accuracy, many traders combine it with other indicators such as moving averages, RSI, trend lines, or volume analysis. When a Fibonacci level coincides with a moving average or a major trend line, the likelihood of the price reacting strongly at that point will significantly increase.