90 million active demat accounts in India.
Less than 1% understand Fibonacci retracement.
This mega thread will help you understand better—starting today:
Collaborated with @AdityaTodmal
1/What is Fibonnaci (Fibo) retracement?:
•Fibo retracement levels help us to identify potential reversal area or identifying potential entry point after a pullback.
•It represents various levels of significance within a swing high and low.
2/How to plot the Fibo?
•Spot the recent swing high & swing low (usually a peak & a low) on a chart.
•Plot the Fibo on these points.
•You'll get 5 key levels of support & resistance (S/R) in between the peak & low.
•Key Fibonacci ratios: 23.6%, 38.2%, 50%, 61.8%, & 100%.
3/ Importance of retracement levels:
• The retracement level forecast can determine the level at which retracement is likely to occur.
• These retracement levels offer traders a favourable entry to open new trades in the direction of the trend.
4/ When to apply Fibo:
•Fibonacci analysis can be applied when there is a noticeable up-move or down-move in prices.
•Applying it in range bound markets would turn out to be a futile exercise.