Fibonacci Retracement
A charting tool that marks possible support and resistance levels based on Fibonacci ratios after a price move.
Fibonacci retracement is a technical analysis tool used to estimate where a crypto asset’s price might pause, bounce, or reverse during a pullback. Traders draw it between a recent low and high, or high and low, and the tool plots horizontal levels based on common Fibonacci ratios such as 23.6%, 38.2%, 50%, 61.8%, and 78.6%. These levels are not magic predictions; they are reference points where market participants often watch for buying or selling interest.
It matters because crypto prices can move quickly, and traders use retracement levels to plan entries, exits, stop-loss areas, or zones to watch alongside other signals like volume, trendlines, or moving averages. For example, if Bitcoin rises from $50,000 to $60,000, a 38.2% retracement would suggest a possible pullback area near $56,180. If price slows or rebounds there, some traders may see it as support; if it breaks through, they may look to the next level. Fibonacci retracement is best treated as a guide, not a guarantee.
Other terms in Technical Analysis
Bollinger Bands
A volatility indicator that plots bands around a moving average to show when a crypto asset may be unusually high, low, or entering a volatile period.
Bullish Divergence
A bullish divergence is a chart signal where price makes lower lows while an indicator makes higher lows, hinting that selling pressure may be weakening.
Candlestick Chart
A price chart that shows an asset’s open, high, low, and close over repeated time periods.
MACD
A momentum indicator that compares moving averages to help traders spot possible trend changes in a crypto asset’s price.