Fibonacci Crypto Trading: Fibonacci Retracement Levels And Extensions Explained

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On the 4-hour timeframe, it has already crossed below the 50-day moving average line, indicating a selling bias. TheFibonacci sequence is a set of numbers that includes a certain pattern like, 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc. Every number in this sequence is the sum of its previous two numbers and every number is 1.618 times greater than the previous number. The Fibonacci ratios are calculated simply by dividing the numbers in the Fibonacci sequence. For example, the ratio of 61.8% is calculated by dividing 21 by 34 or dividing 55 by 89.

fibonacci extension

In this guide, we’re going to share some of the most powerful techniques for building a trading strategy using the Fibonacci retracement tool. Financial market technical analysis employs tools such as chart patterns, indicators, and trendlines to determine the best buying and selling… Crypto trading can feel unpredictable, but as a speculative asset class it responds to technical analysis surprisingly well. It also works well with Fibonacci retracement levels, often producing a strong trend reversal at key price zones, and with Fibonacci extensions to find support.

Ethereum Price

The Fibonacci numbers are arranged in the middle from 23.6% at the top down to 78.60% at the bottom. Sign up for Crypto for Advisors, our weekly newsletter defining crypto, digital assets and the future of finance. A swing high is simply a candlestick at the peak of a trend in any time frame that has a lower high directly to its right and left. Conversely, a swing low is the low candlestick stick of a trend with a higher low on each side.

  • As a speculative asset, it’s especially susceptible to emotion-driven price movements, making it especially responsive to Fibonacci ratios and Elliott Wave Theory.
  • ETH/BTC is a popular cryptocurrency trading pair that denominates the price of Ethereum in Bitcoin.
  • The content published on this website is not aimed to give any kind of financial, investment, trading, or any other form of advice.

From the image above, we can see that the price bounced off the 0.618 Fibonacci level, and the uptrend continued. The 0.618 Fibonacci level acted as support for the price in the chart. Mathematically derived trading decisions are handy, but notwithstanding, they still have a relatively wide error margin. These margins are hardly bridgeable; therefore, it is important to apply caution while trading using any strategy.

Identifying resistance levels

The indicator uses percentages and horizontal lines to identify important support and resistance points during an uptrend or a downtrend. Fibonacci retracements are drawn on 1D charts to identify the long-term trends of the asset price. Based on the Fibonacci retracements, the trader includes criteria such as entry and resistance levels, stop-loss targets, and support lines. Fibonacci levels are a technical analysis tool that uses horizontal lines to indicate areas of support or resistance in the price of an LTC asset.

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crypto fibonacci ratios are derived from the Fibonacci sequence — a series of numbers where the next number in the sequence is the sum of the previous two numbers. D2T began selling tokens three weeks ago and has raised more than $6.9 million. Following the presale, D2T will be listed on LBank and BitMart, with a significant increase in asset price expected. Litecoin was rejected below the $83.65 resistance level on the technical front, and candle closings below this level triggered a bearish correction. On November 25, Bitcoin, the leading cryptocurrency, failed to break above the $16,800 level and began to fall toward the 38.2% Fibonacci retracement level. Similarly, Ethereum, the second most valuable cryptocurrency, has followed Bitcoin’s lead and is currently trading bearishly toward $1,160.

ETH Example: Does Ethereum Follow Fibonacci Retracement Levels?

But first, you need to crypto fibonacci how to add Fibonacci retracement level using our GoodCrypto free Fibonacci retracement tool. To know where to use Fibonacci retracement, choose the highest and lowest points in this trend. In this instance, the chosen time frame for Fibonacci retracement is 1 day. He started trading forex five years ago, and not long after that, he picked up interest in the crypto and blockchain systems.

When the price reaches one of these levels, we expect that either a trend continuation or reversal will occur. The two additional levels of 50% and 76.4% are added by traders, even though they aren’t provided by the Fibonacci formula. This is because, historically, price trends tend to find support and resistance at these levels as well. Consequently, adding them to the Fibonacci levels on your chart can provide further insight for market entries or exits.

How You Use Fibonacci Retracement Depends on Your Crypto Strategy

The Fibonacci ratio is BTC derived from the Fibonacci sequence popularized by Liber Abaci. The sequence itself isn’t all that is important, the ratio between each number is also significant. Liber Abaci solved the theoretical growth rate of the population of rabbits using a sequence of numbers now bearing the author’s name.

The Fibonacci support and resistance lines are extremely useful when you can’t clearly distinguish support and resistance lines on a chart. This can help you immensely with market entries and exits, even though the price seems to be going in only one direction on a macro scale. Let’s have a look at a Fibonacci extension and retracement example to see how it can help you determine price targets in a downtrend.

A sell signal would be generated when price is at Fib resistance and the MACD lines cross bearish. Finding Fibonacci retracement resistance works the same way, but by drawing from the top of a completed trend to the following trough. Resistance lines will be drawn at each key Fibonacci retracement level. Fibonacci crypto trading begins with reading the tool once it has been properly drawn as described above.


Each number in the sequence being the sum of the last two numbers before it. They follow the pattern 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144 etc. As you can see, the retracements of 0.236, 0.382, 0.5, 0.618, 0.786 were all respected as support, at least temporarily, as price rebounded from its September plunge.

However, finding the right occasion when to use Fibonacci retracement is a matter of trading experience. Fibonacci retracement crypto may seem obvious in hindsight but placing confident trades in relation to these levels can be mind-boggling. But is Fibonacci retracement accurate and should you rely on swing high swing low Fibonacci in crypto trading? To answer this question, let’s first explain how to use the Fibonacci retracement in practice.

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All the ratios, except for 50% , are based on some mathematical calculation involving this number string. The indicator is useful because it can be drawn between any two significant price points, such as a high and a low. That being said, many traders use Fibonacci retracement in combination with other indicators and technical signals, demonstrating its effectiveness when used correctly. Fibonacci retracement levels can be used to identify your entry points , to set your exit points , or to decide where to put your stop-loss order.