Fibonacci reversal points – what they are and how to use them in crypto trading.
Fibonacci reversal points are one of the types of reversal points. For their calculation, as the name implies, numbers and Fibonacci levels are used. They are calculated using a special mathematical formula and are quite common in trading in various markets.
Based on the Fibonacci numbers, the values of which are 0.618, 0.382 and 0.236, the so-called Fibonacci levels have been developed, with which you can succeed in trading and earn money. A number of these numbers have several specific features.
The first and most important thing is that the ratio of one of these numbers to another is close to the golden ratio, that is, to 1.618. To use Fibonacci numbers in buying and selling digital money, many use different types of charts: levels, arcs, fans, time zones, and others.
There are quite a few different ways to use Fibonacci numbers in cryptocurrency trading (spirals, channels, wedges, and so on), but their essence is the same – to determine the length of the correction. Everyone chooses the most convenient strategy for themselves, but we will tell you about one of the most famous and used.
What are the levels and what do they mean Support and resistance levels are considered to be one of the most popular and most reliable tools.
To do this, market participants need to know price benchmarks, because this will allow them to determine whether it is worth buying now, it is profitable to sell and where the price can change its course.
To build a graph with the Fibonacci level, you need to specifically display it on the screen, and then adjust the grid. After displaying the grid for the Fibonacci correction, you can start setting up. We place the mouse on the highest point of the graph, clamp it and lead it down to the lowest coordinate. After that, the Fibonacci grid we need will appear on top of the chart with several parallel horizontal lines that are built from certain points. The zero level shows the lowest price of the cryptocurrency, and the first one shows the highest.
The remaining lines located between these two just turn out to be the Fibonacci levels we need, because the coordinates of three of the available five parallels take the values of Fibonacci numbers.
The essence of these indicators is that, specifically at these levels, the support and resistance of the exchange rate are the most significant. If the price of a currency tends to go up, then there is a high chance of its stabilization for some time and an early fall specifically while being at the levels of 0.236, 0.382, 0.5, 0.618 and 0.786 from the smallest value in 24 hours.
It also works in the opposite direction: when the value of the currency decreases, then after reaching these limits, the exchange rate normalizes and becomes stable, after which the decline continues at a relatively slow pace, or even tends to go up. It should also be taken into account that the Fibonacci levels can go beyond the range from 0 to 1 and these values are also marked by course corrections. Thanks to the help of Fibonacci levels, the investor can adjust his assumptions and make the right decisions before changing the course.
It is worth noting that this tool is used exclusively in the presence of a certain pronounced trend. If it is used on such a tool that makes movement inside the sidewall, the processing of the levels will not be of the best quality and their use will not bring much profit in the long run.
Some practice and observations will allow a novice investor to better understand how to invest better and more correctly using Fibonacci levels. Despite the simplicity of this method, its effectiveness has been proven over time.