Fibonacci Retracement Lines
Can someone please briefly explain why Fibonacci Retracement Lines are legitamate? Why do charts hit the exact perecentage levels? What is the significance of these lines? I have read various technical analysis books but have had difficulty finding the answers to my questions. To what capacity can Fibonacci Retracement Lines be used as a forward looking tool?
Answers
653 points
DaveDiggz answered 8 months ago …
Hi, I had this saved from a few months ago -- I'm not sure if you were looking for 'deeper' explanation, but this one seemed pretty clear to me and help me "get" the concept a bit more. The goal is to help predict future support and resistance levels which in turn helps predict price targets:
http://www.chartfilter.com/reports/c14.htm
493 points
warren answered 8 months ago …
They are just a ratio that is found in nature and throughout the worlds architectural structures. Chart don't always hit the levels but you can use them as support lines then resistance lines.
Measure from the beginning of a rally to the top or vice versa and many times the correction will stop at the 63 or 50 level. You can use that along with trend lines being broken and other support resistance lines and a few indicators in order to see a trend change and use that as a leadinf indicator.
I don't so much see it as a leading indicator as another tool to see potential trend changes and put stops or targets in place.
If you don't quite follow any reading you do on it, just use it on lots of charts and you will see how it works.
Good luck
Warren
www.preciousmetalstockreview.com
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