Using Fibonacci Retracement Indicator Levels For Cryptocurrency Trading

What Are Fibonacci Retracement Indicator Levels?

One popular tool when trading cryptocurrencies is called the Fibonacci Retracement indicator. It’s intended to help traders find the right times to buy and sell, and for cryptocurrency traders who understand its methods and madness, it can prove quite useful.

The Fibonacci number sequence helped to produce a ratio of 61.8%, which in math circles is called the “Golden Mean.” While the math speak will go over most people’s heads, it’s important to know that the Fibonacci sequence is often found in the geometry of nature, such as animal skin, DNA structure, and even the spiral shells of seashells. We also see the Golden Ratio with regard to human behavior.

For instance, when people are asked to choose between two value-neutral options, studies show those responses are split 62-38, not 50-50. As you can figure out, 62% is simply rounding up from the Golden Mean of 61.8%. The Golden Mean is now starting to be seen in our financial markets. We now see that financial markets, in both price and time, advance by 100% and retrace 61.8%.

In simple terms, Fibonacci retracement refers to areas of support or resistance. The Fibonacci levels that we use are 23.6%, 38.2%, 50%, 61.8%, and 100%. These levels are static, which makes them easy to identify. They are inflection points that allow traders to anticipate points where there will either be a bounce or break. For those who understand them, they indicate a place to either buy or pullback if there’s an uptrend, whereas the Fibonacci retracement levels can indicate short selling during a downtrend.

By far, the most important Fibonacci level is 0.618, the Golden Mean. This is the point where sellers give up while those looking for a bargain get into the market. Of course, some traders won’t make a move until the price moves 5 to 10% above or below the Fibonacci level to confirm their speculation. This is not a bad move since the Fibonacci levels won’t be precise.

Testing Fibonacci

Let’s test the Fibonacci retracement levels with regard to BTC, which reached its peak value on December 16, 2017 before declining. The 23.6% Fibonacci level was tested on on December 23 when the price broke through that level. By January 6, the price had climbed above and then fell below the 23.6% level.

The price them broke down through the 38.2% level on January 16, 2018. On January 20, the price briefly came back to that level before a sudden decline. The 61.8% level was tested on March 20 when the price broke through that level only to rebound the next day. The price broke through that level again on March 28. On April 6, the price of BTC had retraced 66% from its December 16 peak. But since that point, it has started trending upward again.

Meanwhile, it’s important to know that there was not much volume accompanying the December 16 peak, indicating it was likely to drop soon. However, volume did increase when the price broke the 23.6% level, but not when it climbed above 23.6% on January 6. The volume continued to decline until a spike a spike that coincided with the 61.8% being tested on March 28. Volume then remained low following this point, indicating an upswing may not be in the cards.

However, since the 66% was tested on April 6, volume has started to increase, letting us know that we may have reached the bottom and should expect things to pick up. Remember, the Golden ratio is 61.8%, which is within the 66% level, and based on human behavior, the market typically traces back 61.8%. Barring outside influences like world political or financial events, savvy cryptocurrency traders could buy at the 23.6% level of the decline.

Final Thoughts

Serious cryptocurrency traders should keep in mind that Fibonacci levels are merely points of interest. Prices will not always swing from one Fibonacci level to the other. Indicators like volume or momentum are also important to monitor to help confirm what you know about Fibonacci levels. You should also not expect to see retracement levels to be exact. Instead, have a range of 10 to 15% for those targets.

Also, keep in mind that high-volume markets are more likely to show retracement levels. When dealing with individual stocks, this may not be the case. As it relates to cryptocurrency, the main players like BTC and ETH will be more likely to show retracement levels than minor tokens.

Most importantly, the Fibonacci tool is not going to be simple and easy to use in most circumstances. It’s simply one additional tool you can use to calculate probabilities, and playing those probabilities the right way is what will lead you to maximize your success.

Get Free Email Updates!

*Action* Enter Best Email to Get Trending Crypto News & Bitcoin Market Updates

I will never give away, trade or sell your email address. You can unsubscribe at any time.

Avatar
Bitcoin Exchange Guide News Team
B.E.G. Editorial Team is a gracious group of giving cryptocurrency advocates and blockchain believers who want to ensure we do our part in spreading digital currency awareness and adoption. We are a team of over forty individuals all working as a collective whole to produce around the clock daily news, reviews and insights regarding all major coin updates, token announcements and new releases. Make sure to read our editorial policies and follow us on Twitter, Join us in Telegram. Stay tuned. #bitcoin

[Alert] Use the author's self-conducted information at your own risk, do you own research, never invest more than you are willing to lose.

[Disclosure] The published news and content on BitcoinExchangeGuide should never be used or taken as financial investment advice. Understand trading cryptocurrencies is a very high-risk activity which can result in significant losses. Editorial Policy \\ Investment Disclaimer

LEAVE A REPLY

Please enter your comment!
Please enter your name here

3,437FansLike
2,795FollowersFollow
4,190FollowersFollow

Live Bitcoin Price & Latest BTC Charts

Today's Latest Crypto News

Blockstream CEO Doesn’t Sell Any Bitcoin Mined on Anticipation of 3,000% Price Increase

Bitcoin miners might be busy selling more bitcoin than they are creating post halving but Adam Back, the chief executive officer of Blockstream Corp.,...

Coincheck Crypto Exchange Clients’ Data Compromised After Hacker Breached Its Domain

Japan-based cryptocurrency exchange, Coincheck, announced yet another hack – this time about 200 customers data was compromised after a domain account error. According to...

Crypto Crimes Soaring to $1.4 Billion in 2020; COVID-19 Related Frauds also Emerging

During the first five months of 2020, losses from cryptocurrency hacks, thefts, and frauds spiked to about $1.4 billion, as per the report from...

Crypto Ratings Council May Rate Tron (TRX), Polkadot (DOT), and Nervos (CKB) Token As Securities: Unofficial Report

Quick look: The Crypto Rating Council (CRC) preliminary reports show three altcoins – Tron (TRX), Polkadot (DOT), and Nervos Network (CKB) are highly likely...

Coinbase Drops APY for USDC Stablecoin from 1.25% to 0.15% Starting Today

Coinbase has said that it will reduce the annual rewards on holding USDC stablecoins by 88% in a recent email announcement. The firm noted...

BitcoinExchangeGuide is a hyper-active daily crypto news portal with care in cultivating the cryptocurrency culture with community contributors who help rewrite the bold future of blockchain finance. Subscribe on Google News, see the mission, authors, editorial links policy, investment disclaimer, privacy policy. Got News? Contact us, we are human too. Note: nothing here is financial advice, do your own research thoroughly.

Start Using Crypto Today