What is Fibonacci Retracement? How to use Fibonacci Retracement in Trading? Explained By CA Rachana

Summary

In this video, CA Rachana Ranade introduces the concept of Fibonacci retracement in technical analysis, a tool used to predict stock market reversals. She explains the Fibonacci sequence and its prevalence in nature, then connects it to financial markets, demonstrating how retracement levels can estimate potential reversal points. Rachana also shares a personal trading example, illustrating the practical application of Fibonacci ratios for profit. The video is an engaging tutorial on a key technical analysis tool, with a call to action for further learning.

Takeaways

• 🔢 13 divided by 21, 34 divided by 55, and 89 divided by 144 all yield the same result.
• 📉 The concept of Fibonacci retracement is used in technical analysis for stock markets.
• 📜 Fibonacci sequence was introduced to the West by Leonardo of Pisa in 1202.
• 🔢 Fibonacci numbers are natural numbers starting with 0 and 1, and each subsequent number is the sum of the previous two.
• 🌸 Fibonacci numbers appear in nature, such as in the number of petals on flowers and the structure of pineapples.
• 📈 Fibonacci retracement helps determine potential reversal levels in stock market trends.
• 📏 The golden ratio, also known as PHI, is approximately 0.618 and is derived from Fibonacci numbers.
• 📊 To use Fibonacci retracement, you divide a chosen Fibonacci number by itself and other preceding numbers to get specific ratios (1, 0.618, 0.382, 0.236).
• 🔄 In stock market terms, retracement is a temporary reversal in the direction of the market trend.
• 💡 Fibonacci retracement levels help predict up to which point a market might retrace before continuing in the original direction.

Q & A

What is the common answer to the divisions 13/21, 34/55, and 89/144?

The common answer to these divisions is approximately 0.618, which is known as the golden ratio.

Who introduced the Fibonacci sequence to the West?

The Fibonacci sequence was introduced to the West by Leonardo of Pisa, also known as Fibonacci, in 1202.

What are the first two Fibonacci numbers?

The first two Fibonacci numbers are 0 and 1.

How are Fibonacci numbers calculated?

Fibonacci numbers are calculated by adding the current number to the previous number in the sequence. For example, 0 + 1 = 1, 1 + 1 = 2, 2 + 1 = 3, and so on.

Where can Fibonacci numbers be found in nature?

Fibonacci numbers can be found in various natural phenomena, such as the number of petals on flowers and the arrangement of cones in a pineapple.

What is the golden ratio and how is it related to Fibonacci numbers?

The golden ratio, approximately 0.618, is found by dividing a Fibonacci number by the next number in the sequence. For example, 55 divided by 89 equals approximately 0.618.

How is the golden ratio used in stock market analysis?

The golden ratio is used in stock market analysis to calculate retracement levels, which help predict how far a stock price might move during a correction or retracement.

What is a retracement in stock market terms?

A retracement in stock market terms is a temporary reversal in the direction of a stock's price, either moving upwards during a downward trend or downwards during an upward trend.

How can Fibonacci retracement levels help in trading decisions?

Fibonacci retracement levels can help traders determine potential reversal points in the market, allowing them to make informed decisions about when to enter or exit trades.

What website does the speaker recommend for practicing Fibonacci retracement?

The speaker recommends using the website indottradingview.com for practicing Fibonacci retracement.