Fibonacci Retracement is one of the most popular tools in technical analysis, used by traders to predict potential support and resistance levels. Named after the famed Italian mathematician Leonardo Fibonacci, this technique draws from a sequence of numbers (0, 1, 1, 2, 3, 5, 8, 13...) where each number is the sum of the two preceding numbers. This sequence reveals key ratios, such as 23.6%, 38.2%, 50%, 61.8%, and 100%, which are used to identify areas where a market might retrace before continuing its trend. One common strategy involves buying when an asset retraces to the 100% Fibonacci level (the bottom of the price move) and selling when it reaches 0% (the top). Let's break this down in detail, exploring both the mechanics and the probabilities involved.
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