Fibonacci Arcs, Fans and Retracement

Fibonacci Arcs is one of the four most common studies in Fibonacci for analyze markets in terms of support and resistance levels.

Fibonacci Arcs are created by finding the lowest and highest prices for a certain market and then an invisible trendline is drawn between these two points. Three curves are then drawn which intersect this trendline at the key Fibonacci levels of 38.2%, 50% and 61.8%. The prices of the asset cross through key levels when the transaction decision was made.

Most of the times, Fibonacci Arcs and Fibonacci Fans are plotted in the same chart. The point of interactions of these lines is determined the supports and resistance levels.

Arc:



Arc and Fans:


Retracement:

Fibonacci Retracements is the most heavily used Fibonacci tool. The calculation of the Fibonacci Retracement levels will identify significant lows to significant highs. The initial difference (low to high or high to low) should be retraced from those prices using a ratio of the Fibonacci sequence.

The three levels of Fibonacci retracements are 38.2%, 50% and 61.8 %. There is no relationship between 50 % and the Fibonacci. The reason that the 50% is used by traders is that there is a tendency for instruments to reverse after retracing half of the previous move.