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May 29, 2025
3 min read
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intermediate
Category: Trading Strategies and Techniques – Beginner to Intermediate
At Tradyx.ai, we believe in combining smart technology with proven techniques — and one tool that has stood the test of time across markets is the Fibonacci retracement.
Whether you're trading crypto, forex, or stocks, understanding how to use Fibonacci retracement can help you identify potential reversal zones and make more confident decisions. In this post, we’ll break it down simply — no math degree required.
Fibonacci retracement is a technical analysis tool based on key ratios derived from the Fibonacci sequence — a series of numbers where each is the sum of the two preceding ones (1, 1, 2, 3, 5, 8...).
These numbers give us ratios like:
These levels are drawn between a high and low price, and they suggest where the market might pull back before continuing its trend.
Using Fibonacci is simple with modern tools — including Tradyx.ai’s built-in charting features:
1️⃣ Identify the Trend
Start by finding a clear swing high and swing low.
In an uptrend, draw from the low to the high.
In a downtrend, draw from the high to the low.
2️⃣ Let the Tool Do the Work
Our tools automatically display the key levels.
3️⃣ Watch Key Levels
Look for price reactions at the 38.2%, 50%, and 61.8% retracement levels — these are often areas where traders expect reversals or continuation.
📌 Pro Tip: Combine Fibonacci levels with other tools like RSI or support/resistance to confirm signals.
Here’s how Fibonacci helps in real trading:
🔹 Entry Points
Traders often enter trades on pullbacks to a Fibonacci level within a larger trend.
🔹 Stop-Loss Placement
Stops are usually placed just below the Fibonacci level (in an uptrend) or above (in a downtrend) to manage risk.
🔹 Take-Profit Zones
Traders may take profits at or near the next Fibonacci extension level.
While useful, Fibonacci retracement isn’t magic. Avoid these common mistakes:
❌ Relying on Fibonacci Alone
Always confirm with price action, volume, or indicators.
❌ Forcing It on Unclear Trends
Only use Fibonacci on clean, directional moves — not sideways or choppy markets.
❌ Ignoring Risk Management
Even the best setups can fail. Protect each trade with proper position sizing and stop-loss rules.
Fibonacci retracement is a powerful tool when used correctly — helping you spot low-risk entry points, logical exits, and hidden support/resistance levels.
At Tradyx.ai, we support you with intelligent tools that remove the noise, helping you understand key market levels and apply your strategies with confidence.
Stay tuned,
— The Tradyx.ai Team
