Fibonacci Fan

Brief

The section explains how to work with the AAdd Fibonacci Fan 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 Fan tool can help determining how far the prices might retrace. The tool is drawn by placing Trend Line between two extreme points on a chart (usually trough and peak or peak and trough) and three spreading lines originating from the first (starting) point of Trend Line. By default, the degree of the lines' spreading is based on the key Fibonacci ratios of of 0.382, 0.500, and 0.618 of the vertical distance between the starting and ending points of Trend Line. The greater the vertical distance is, the greater the spreading is. Traders can use these spreading lines as support and resistance levels during the market retracement that can help determining trade entry points.
The Fibonacci Fan tool is often drawn together with the Fibonacci Arc tool. The intersection points of the tools' elements (arcs and spreading lines) are considered to be exceptionally strong support or resistance levels.