Fibonacci retracement is used to estimate how deep a pullback might go before the trend continues.
Steps
- Identify one clear swing: from swing low to swing high for an uptrend.
- Draw the Fibonacci tool from the start point to the end point of that swing.
- Watch the 38.2% – 50% – 61.8% levels as the commonly observed pullback area.
Be consistent in how you draw it (e.g. always body-to-body or always wick-to-wick).
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