Fibonacci levels are plotted by taking a high and low (the sharper the movement the better) on the price chart and plotting the 23.6%, 38.2% and 61.8% ratios horizontally to create a grid. .

These horizontal lines are used to determine price reversal points.

✅ After a large rise in price, traders will measure the movement from bottom to top to find how far the price could retrace before recovering and continuing in the overall uptrend.

✅ After a large drop in price, traders will measure the movement up and down to find where the price could retrace before correcting lower and continuing in the overall downtrend.

Fibonacci retracements in trading are primarily used as part of a trend trading strategy. In this case, traders can use Fibonacci levels to try to open low risk positions on trend reversals.