Practical Guide: How to Use the Fibonacci Indicator in Trading.
What is the Fibonacci Indicator?
The Fibonacci indicator helps predict reversal points in a trend by identifying areas where the price may correct before continuing its move.
The most commonly used levels are:
- 0,236 (23,6%)
- 0,382 (38,2%)
- 0,5 (50%)
- 0,618 (61,8%)
- 0,786 (78,6%)
Levels between 0.382 and 0.618 are considered "golden" zones for buying or selling due to the high probability of reversal.
2. How to Set Up Fibonacci?
Open the Fibonacci tool in your trading platform.
- Example: On Binance, click on "Drawing Tools" and select "Fibonacci Retracement".
Identify a Clearly Defined Trend.
- Uptrend: Select the lowest point (bottom) and drag to the highest point (top).
- Downtrend: Select the highest point (top) and drag to the lowest point (bottom).
Adjust levels as needed.
Make sure to include the key levels: 0.236, 0.382, 0.5, 0.618, and 0.786.
3. How to Use Fibonacci Levels?
Uptrend Shopping
- During a correction, prices often return to the 0.382 (38.2%), 0.5 (50%) and 0.618 (61.8%) levels before continuing to rise.
Tip: Use these levels as entry zones for purchases.
Sales in Downtrends
- In a downward correction, prices usually return to the 0.618 (61.8%) and 0.786 (78.6%) levels before resuming the downward movement.
4. Confirmation with Other Indicators
Combine Fibonacci with RSI or moving averages to confirm entry or exit points.
📍Why are Levels 0.382 to 0.618 Important?
These levels are called the "Golden Zone" because of their historical accuracy in predicting reversals.
0.382 (38.2%): Slight corrections, indicating a strong trend.
0.5 (50%): Average correction, commonly used as a support or resistance point.
0.618 (61.8%): The most reliable level, ideal for buying or selling.
Practical Example:
Bitcoin price is in an uptrend, rising from $20,000 to $25,000.
After reaching $25,000, it starts to correct.
Using Fibonacci:
0,382 → $23.900
0,5 → $22.500
0,618 → $21.800
If the price corrects up to $22,500 or $21,800, it is a good buying zone before continuing higher.
✅Final Tips:
Always use stop-loss to limit losses.
Combine Fibonacci with volume analysis.
Avoid operating only with Fibonacci, confirm the signals with other methods.
With patience and practice, Fibonacci can become a powerful tool to improve your trading strategy!
