Fibonacci Pivots Method
Fibonacci is one of the most widely used and famous pivot-related tools. Many traders, investors, and even rookie traders apply this method for their long-term, swing, or intraday trading.
Traders use the Fibonacci method to predict future price movements of assets. It helps identify potential upcoming support and resistance levels, which are calculated from past price data.
Fibonacci is a tool used to confirm possible support or resistance levels. This indicator should be combined with other tools to increase its reliability, as the sole use of any indicator can reduce its accuracy. Generally, Fibonacci pivots can be used together with RSI, MACD, trend lines, volume, and moving averages (MAs). The more confirmation you have from multiple indicators, the more reliable Fibonacci becomes as an assistant tool.
The price movement of assets does not follow a straight line; it includes many fluctuations, such as pullbacks and retracements. Therefore, many traders use Fibonacci to predict the extent of these fluctuations, which we call pullbacks and retracements.
The amount of pullback or retracement is estimated based on the Golden Ratio principle. The main Fibonacci numbers are 0, 1, 2, 3, 5, 8, 13, 21, etc., where each number is approximately 1.618 times greater than the previous number, and each number is the sum of the two preceding numbers.
To use Fibonacci retracement, you need to draw three lines: at the previous highest level, the lowest level, and the midpoint. Then, using the Fibonacci method, draw lines at the 61.8%, 38.2%, and 23.6% levels. These lines indicate possible support and resistance levels.
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This post is also published on Medium on April 17, 2025, by the same author.
