Firstly, yes I know this is a little off topic mods but please dont delete as im sure this will take me a while to write up and no doubt it'll get reported but its the kind of useful information people seek when they come to HotCopper.
So here we go.... This is not gospel, just my opinion from what I have seen and experienced, other's opinions may vary and are welcome to contribute, THIS IS NOT ADVICE !!!! simply to point people in the right direction as I know it can be confusing at first to learn
What Is A FIB retrace ratio ?
A Fibonacci retracement is a popular tool among technical traders and is based on the key numbers identified by mathematician Leonardo Fibonacci in the 13th century. Fibonacci's sequence of numbers is not as important as the mathematical relationships, expressed as ratios, between the numbers in the series.
In technical analysis, a Fibonacci retracement is created by taking two extreme points (usually a major peak and trough) on a stock chart and dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%. Once these levels are identified, horizontal lines are drawn and used to identify possible support and resistance levels.
The Fibonacci sequence of numbers is as follows: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc. Each term in this sequence is simply the sum of the two preceding terms, and the sequence continues infinitely. One of the remarkable characteristics of this numerical sequence is that each number is approximately 1.618 times greater than the preceding number. This common relationship between every number in the series is the foundation of the common ratios used in retracement studies.
The key Fibonacci ratio of 61.8%, also referred to as "the golden ratio" or "the golden mean," is found by dividing one number in the series by the number that follows it. For example, 21 divided by 34 equals 0.6176 and 55 divided by 89 equals 0.6179.
The 38.2% ratio is found by dividing one number in the series by the number that is found two places to the right. For example, 55 divided by 144 equals 0.3819.
The following is just my basic write up, for more info go to this page
https://www.investopedia.com/articles/forex/11/fibonacci-rules.asp
Why Is It Useful ?
FIB ratios often act as magnets on a chart, they are extremely useful for finding support levels on pullbacks, fib ratios often provide a good low risk entry to a stock, especially after it has had a huge run, however THESE SHOULD NOT BE USED ALONE !!,
Dont use these as the only reference or as a golden guide, often stocks will overshoot a fib ratio by a pip or two and if a fib ratio fails then the stock is usually drawn towards the next Fib retrace point.
How Do You Calculate A FIB Ratio ?
Take the lowest point of an uptrend and the highest point of that SAME uptrend, this will give you your numbers, either use a charting tool or use a FIB calculator to work out the retrace levels, I will provide an example of each below 1st picture:
It is important to remember that you take the lowest point of a candle that has two higher lows on each side, as you will see when you look up the BIT chart the reference of 0.078 has a higher low on both sides so 0.078 is the low point of the trend and 0.445 obviously the high point. 2nd picture:
A simple calculator to help work out your fib ratios once you have a look at the chart or just want to confirm, to find one – google it.
Example of BIT ?
Pic provided above.
Please note that its very rare for a %61.8 to get hit in the same day that a stock begins to retrace, usually the process takes several days at least but this stock is something different alright haha
Do They Always Get Hit ?
NO of course not, but the two most common are the 38 and the 61, 61 being the most common, once support on the 38 fib is broken naturally it will gravitate towards the 61%, another thing to note is gaps in the chart, if the %61 is near a open gap it will normally overshoot it and fill the gap at the same time.
What Happens When It Goes Below %61.8 ?
If there is no gap open and it drops below the 61% by a decent amount itll head towards the next the 76 is not very common to provide a bounce so this would only normally happen when a company has bad news or all interest from the stock fades at which point it will refer back to the %100 which on BIT is 0.078 with a gap being at 0.062-0.072 as its close like mentioned above it would no doubt continue down to 0.062 to fill, I am NOT saying this would happen just giving an example of what does happen.
Im sure I have missed something or people have questions, I hope I explained that easily enough, ask and I will reply when I can. Thanks
BIT Price at posting:
24.5¢ Sentiment: None Disclosure: Not Held
(20min delay)