Greetings to all readers of this great platform, especially to those of the #LeoFinance community, in this opportunity I come to share with you information regarding operations in trading, using a well-known technical indicator called "Fibonacci Retracement" which is mainly used to determine the trend changes in a market, either bullish to bearish or vice versa, this helps us make decisions to invest or withdraw our investment from the market, at the time that this confirms a change in trend.
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To understand a little more about Fibonacci Retracements, it is necessary to know that it is a technical indicator based on mathematical calculations, which generally work to determine the behavior of a graph determining the corrections or setbacks that this may have in the future, it is applicable in any temporality that we want to apply, and works in both directions, i.e. bullish and bearish market.
There are certain peculiarities for the application of Fibonacci Retracements, and several concepts that must be understood before applying it, among which we must take into consideration what is known as the golden ratio, and can be identified as the time at which the action or change in trend is confirmed, and this applies in both bearish and bullish markets, for a better understanding in the application of it I will show its application in 2 graphs, one with uptrend and one with downtrend.
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When plotting the Fibonacci Retracement in an uptrend, it is necessary to determine the lowest point of the price, which will be the starting point, to the highest point reached by the market price, in the time we want to study, this will generate a series of horizontal stripes of various colors, which will be represented as the supports that will have the market price at the time of making its change of trend, as shown in the chart below.
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On the contrary, when plotting the Fibonacci Retracement in a downtrend, it is necessary to look for the highest point reached by the market price, which will be our starting point for the Fibonacci plot, and then we look for the lowest price point, in the period we want to study, this will also show us a series of colored stripes, which will be represented as the resistances that the price must overcome when there is a change of market trend, as shown in the chart below.
As it could be observed, the technical indicator of the Fibonacci Retracement, is a very useful tool, which can help us to determine the future trend changes of a market, in the same way to plot this indicator, we will have a clearer view on the supports or resistances in the market depending on the case of the market, ie in bullish or bearish market, with the application of this technical indicator we can begin to understand a little better the behavior of the market we are studying, and will help us make better decisions in conjunction with other indicators.
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