A Really brief explanation on Fibonacci Retracements

Fibonacci retracements are a popular technical analysis tool used by traders to identify potential levels of support and resistance in an asset's price action.

The tool is based on the famous Fibonacci sequence, in which each number is the sum of the previous two numbers (e.g. 1, 1, 2, 3, 5, 8, 13, 21, etc.).

In the context of trading, Fibonacci retracements are used to identify key levels at which an asset's price may experience a reversal or pause in its trend.

These levels are calculated by taking the asset's most recent significant high and low, and dividing the vertical distance by key Fibonacci ratios (0.236, 0.382, 0.500, 0.618, and 0.768).

These levels, often represented as horizontal lines on a price chart, can provide traders with potential areas to enter or exit a trade, as well as areas to place stop-loss orders.

It's important to note that Fibonacci retracements are not a standalone trading strategy and should be used in conjunction with other technical analysis tools and fundamental analysis.

One of the key advantages of using Fibonacci retracements is that they are based on a well-established and widely-recognized mathematical concept, which can give traders more confidence in the potential validity of these levels.

It's also one of the most used trading tools by traders and algorithms. Because of that these levels could also become a self fulfilling prophecy.

Another advantage is that these levels are objective and can be applied to any asset, making them a versatile tool for traders of different markets and timeframes.

It's also important to keep an open mind and not rely solely on Fibonacci retracements, as they can be subject to interpretation and may not always accurately predict price movements. Instead, use them as one piece of the puzzle in your overall trading strategy.