Here is a chart of the price of Ripple (XRP) yesterday on Bittrex. Around 12:30pm eastern time, the price of Ripple against Bitcoin jumped nearly 17% over the course of fifteen minutes, as seen below.
I was shocked to see this amazing increase happen right before my eyes, but not as shocked as I was when I discovered how closely the price action that followed was governed by Fibonacci Retracement Lines.
Fibonacci Retracement Lines are used frequently by professional traders to gain insight on future price action, based on a current price movement.
The bottom of the retracement is drawn starting at the bottom of a price swing, and the top of the retracement is placed at the top of the swing. Lines are then drawn, based on ratios which correspond to the Fibonacci Sequence. They are placed at 61.8%, 50% and 38.2% of the total price movement.
These lines, when applied to trading, often represent possible areas of support or resistance. In the case of the chart above, they were amazing indicators of future price movement!
Take note of how the price bounced along these lines, or was constrained by the lines.
I am am relatively new to trading, and learned about these retracement lines on YouTube. I hadn't seen a practical application of the technique first hand, until I watched it unfold yesterday. Its truly shocking how these lines subtly affect crowd psychology, without you even noticing!
Here is a good article on Investopedia about Fibonacci Retracement Lines.
If you are an experienced trader, have more insight about Fibonacci Retracements, or want to correct a mistake in my article, please let me know in the comments! It's my goal to make the most informed posts, and share quality content with my followers.
Thank you for reading!
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