The application of the Fibonacci sequence in the cryptocurrency market is a technical analysis technique that helps identify potential
1. Understand the Fibonacci Tool
• Fibonacci Extension: Used to identify potential price levels above or below an initial move, indicating how far the price can go.
• Fibonacci Retracement: Used to identify potential support and resistance areas during a price correction.
2. Identify the Key Move
• Choose a starting point and an ending point of a significant move on the chart, such as:
• A clear bottom (minimum).
• A clear top (maximum).
3. Use Chart Tools
Most trading platforms, such as TradingView, Binance, and MetaTrader, have built-in Fibonacci tools.
4. Identify the Levels
Fibonacci levels will automatically be drawn on the chart, showing:
• Common levels: 23.6%, 38.2%, 50%, 61.8% and 100%.
• These levels act as potential support or resistance zones.
5. Make Decisions Based on Levels
• In an uptrend:
• Look for entries near support levels, such as 38.2% or 61.8%.
• Targets can be set above the previous high, using Fibonacci extensions (e.g. 161.8%).
• In a downtrend:
• Look for sells at resistance levels, such as 38.2% or 61.8%.
• Targets can be set below the previous low.
Practical Example
If a cryptocurrency has risen from $10 to $20:
1. Apply Fibonacci from $10 to $20.
2. Retracement levels will be drawn automatically, as follows:
• 23.6% = $17.64
• 38.2% = $16.36
• 61.8% = $13.64
• 100% = $10.
If the price corrects to $16.36, it could be a good point to buy if the trend continues upwards.
Please note: Fibonacci does not guarantee absolute accuracy; use it as a guide within a broader technical analysis strategy.
