Fibonacci Arc

Brief

The section explains how to work with the Add Fibonacci Arc tool.

Details

During a major trend, prices often retrace for a while and then resume moving in the direction of the major trend again. The Fibonacci Arc tool can help determining how far the prices might retrace. The Fibonacci Arc tool is drawn by placing Trend Line between two extreme points on a chart (usually trough and peak or peak and trough) and three arcs centered around the second point of Trend Line. By default, the arcs intersect Trend Line at Fibonacci Levels of 0.382, 0.500, and 0.618. Traders can use these arcs as support and resistance levels during the market retracement that can help determining trade entry points.
It is often drawn together with the Fibonacci Fan tool. The intersection points of the tools are considered to be exceptionally strong support or resistance levels.