## Fibonacci Values in Trading: From Theory to Practice - 5 Tools That Will Change Your Trading Approach Many traders talk about Fibonacci as if it were an intelligent tool capable of predicting price movements. But the truth is, **Fibonacci values** do not possess any magical power unless you understand the principles and correct methods of use. Today, we will decode this tool clearly so you can apply it effectively in your trading. ## Where Do Fibonacci Values Come From and Why Are They Important in Trading Although Fibonacci is named after the Italian mathematician from the Middle Ages, its history goes much further back. From 400 to 200 BCE, Indian mathematicians discovered this special sequence: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987... The uniqueness of this sequence is that it appears in nature, such as the spiral of snail shells, sunflower seed patterns, and even in the proportions of the human face. Understanding **Fibonacci values** has become essential in art, architecture, and especially in financial market trading. ### Why do traders believe Fibonacci helps? Traders worldwide use Fibonacci because they believe asset prices move according to the same natural laws. When many traders use the same levels, it becomes a (Self-fulfilling prophecy), which is what makes **Fibonacci values** effective in real markets. ## How to Calculate Fibonacci Numbers: Easier Than You Think Calculating Fibonacci is very simple: add the two previous numbers: - 0 + 1 = 1 - 1 + 1 = 2 - 1 + 2 = 3 - 2 + 3 = 5 - 3 + 5 = 8 And the magic is, when performing mathematical operations on these numbers, you always get constant ratios: - Next number divided by the previous = 1.618 (Golden Ratio) - Previous number divided by the next = 0.618 - Previous number divided by the number two places ahead = 0.382 These are the most important **Fibonacci values** for trading. ## 5 Fibonacci Tools Traders Must Know ### 1. Fibonacci Retracement: Find Entry Points During Pullbacks This tool helps you identify entry points when the price retraces in an uptrend or downtrend. The method is to draw from the swing low to swing high (uptrend) or from swing high to swing low (downtrend). The resulting levels are: 0%, 23.6%, 38.2%, 50%, 61.8%, 100%. In an uptrend, when the price pulls back, levels 38.2% or 50% often act as strong support. In a downtrend, the same levels serve as resistance. ### 2. Fibonacci Extension: Set Profit Targets When Price Breaks Levels Once the price breaks out, Extension helps you find target prices. This tool draws from a swing point through the retracement point, giving levels: 113.6%, 127.2%, 141.4%, 161.8%, 200%, 261.8%. These levels indicate where the price might pause or reverse. They can be used as exit points and profit-taking levels. ### 3. Fibonacci Projection: Combining Retracement and Extension Power This tool combines both features, showing retracement and extension levels simultaneously. It’s ideal for comprehensive analysis. ### 4. Fibonacci Timezone: Predict When Price Will Change Direction Instead of focusing on the y-axis (price), this tool looks at the x-axis (time) to identify significant periods. Fibonacci numbers (13, 21, 34, 55, 89, 144, 233...) often mark price reversal points. ### 5. Fibonacci Fan: Diagonal Lines for Multi-Dimensional Analysis This tool creates diagonal lines based on Fibonacci ratios to dynamically define support and resistance levels. As the price moves, these lines adjust accordingly. ## How to Use Fibonacci in Trading: 3 Main Scenarios ### Scenario 1: During a Pullback (Pullback) When the trend is strong but the price temporarily retraces: 1. Use Fibonacci Retracement from the start of the trend 2. Observe where the price stops (23.6%, 38.2%, or 50%) 3. Enter buy or sell positions at these levels with confirmation signals ### Scenario 2: When Price Breaks Out (Breakout) When the price breaks through support or resistance with momentum: 1. Use Fibonacci Extension to set targets 2. Levels 127.2%, 161.8%, or 200% are promising targets 3. Close positions at these levels or when reversal signals appear ### Scenario 3: When Price Moves in a Range (Range) When the price moves sideways without new highs or lows: 1. Use Retracement to identify the range support and resistance 2. Buy at support, sell at resistance 3. Prepare to exit if the price breaks these levels ## Combining Fibonacci with Other Indicators for Greater Accuracy ### Fibonacci + EMA (Exponential Moving Average) Use EMA to identify the main trend, then apply Fibonacci Retracement for entry points: - Price above EMA(50) = uptrend; buy at Fib 38.2% or 50% - Price below EMA(50) = downtrend; sell at Fib 38.2% or 50% ### Fibonacci + RSI (Relative Strength Index) Use Extension for targets and RSI for confirmation: - When RSI shows Overbought with price hitting extension levels = sell signal - When RSI shows Oversold with price hitting extension levels = buy signal ### Fibonacci + Price Action Use Retracement to identify levels and candlestick patterns (Candle Pattern) for confirmation: - Doji + Fib level = strong reversal signal - Hammer/Hanging Man + Fib level = key entry point ## Pros and Cons: What You Need to Know Before Using **Advantages:** - Easy to use, clear readings - Applicable across all timeframes (Timeframe) and assets - Can be combined with various other tools **Disadvantages:** - Subjectivity: different traders may draw levels differently - Using Fibonacci alone is insufficient; confirmation from other tools is necessary - Sometimes, the price ignores Fibonacci levels altogether ## How to Set Up Fibonacci on Your Trading Platform 1. Open your TradingView chart or trading platform 2. Find the Fibonacci tool in the toolbar 3. Select Retracement or Extension as needed 4. Draw between two points on the chart 5. Adjust Fibonacci levels by right-clicking the tool **Tip:** Advanced trading platforms may allow you to add (Custom Levels) to tailor levels to your trading style. ## Frequently Asked Questions **How accurate is Fibonacci?** No tool guarantees 100% accuracy. Fibonacci can yield about 60-70% success in strong markets. Combining it with other tools can improve accuracy. The key is risk management and emotional control. **Can I use Fibonacci with cryptocurrencies?** Yes, because Fibonacci operates on mathematical principles applicable to all assets, including BTC, ETH, and others. Many digital traders regularly use Fibonacci. **Do I need to use Fibonacci all the time?** Not necessarily. Sometimes simple trading with Moving Averages or Support/Resistance levels works better. Use Fibonacci only when it fits the market situation. ## Summary: Fibonacci Is Not a "Magic Bullet" but a "Tool" **Fibonacci values** are highly useful for trading, but they are not a cure-all. Success comes from combining understanding, practice, risk management, and emotional discipline. If you haven't tried Fibonacci before, start by studying real charts and gradually incorporate it into your strategy step by step until it becomes part of your trading approach.

This is what $XAU / $BTC looks like. If you held Gold instead of BTC since the inception of Bitcoin than you made much less gains. You have much less purchasing power. That is all.