Fibonacci was an Italian mathematician who came up with the Fibonacci numbers. They are extremely popular with technical analysts who trade the financial markets, since they can be applied to any timeframe. The most common kinds of Fibonacci levels are retracement levels and extension levels. Fibonacci retracement levels indicate levels to which the price could retrace before resuming the trend. It's a simple division of the vertical distance between a significant low and a significant high (or vice versa) into sections based on the key ratios of 23.6%, 38.2%, 50% and 61.8%.
Price tends to come back to these levels before continuing the predominant trend. Fibonacci extension levels indicate levels that the price could reach after an initial swing and retracement. TradingView has a smart drawing tool for
Fibonacci retracements and one for
Fibonacci extensions that allow users to visually identify these levels on a chart. Both tools are fully customizable and levels can be changed or added.
