Drawing Fibo Retracement Areas on Upwards & Downward Trend

The bitcoin price on a cryptocurrency chart does not move up/down in a straight line. Instead it heads upwards or downwards in a zigzag manner. Fibo Retracement is the tool used to calculate/estimate where the zigzag will stop. The pull back levels are 38.2 %, 50 % & 61.8%. These form the points at which the btcusd market is likely to make a retracement.

A retracement pulls the bitcoin price back before the BTCUSD market returns to its main trend direction.

Examples of Zigzag Movement: The Example below shows bitcoin price moving up in a zigzag manner.

The diagram below shows movement in an upward market.

Retracement on upward Bitcoin trend

1-2: Bitcoin Price moves up

2-3: Pull back

3-4: Moves up

4-5: Pull-back

5-6: Moves up

Given that we can pinpoint where a pullback begins on a crypto chart, how can we ascertain where it will end?

The answer is we use Fib retracement tool indicator.

This line study technique is employed in Bitcoin trading to forecast and assess these levels. The BTC/USD indicator is applied directly to the cryptocurrency chart on the trading platform provided by the broker, automatically calculating these levels.

What are The Retracement Levels

23.6%
38.2 %
50.0%
61.8 %

38.20% and 50.00% Levels are the most used & most of the times this is where the retracement will reach. With 38.20% being the most liked and most widely used.

61.80% is also oftenly used to set stops for trades opened using this strategy.

This tool will be oriented in accordance with the trend as illustrated in the examples provided below.

How to Draw on an Upwards Bullish Market

In the diagram below the bitcoin price is heading up between 1 and 2 then after 2 it retraces downward to 50.00% pull back area then it continues heading upward in the initial upward trend. Notice that this trading indicator is drawn and plotted from point 1 to 2 in the direction of the bitcoin trend (Upward).

Because we think this is a short pause based on using this tool, we place a buy order between the 38.2% and 50.0% marks, with our stop loss just below the 61.8% mark. If you bought at this point in the example shown, you'd have gained a lot of pips.

Fibonacci Drawn on Upward Bitcoin Trend

Explanation for the Above Bitcoin Example

After the BTCUSD trade reached the 50.0 % mark, this area gave much help for the bitcoin price, and then the btcusd trading market started the original up bitcoin trend again & kept going higher.

23.60% offers minimal support and is not an optimal location to place an order.

The 38.2% retracement level offers minor counter-pressure, but in this specific bitcoin illustration, the price continued its decline towards the 50% zone.

50.zero% presents quite a few assist & in this case, this become the suitable point to set a purchase order.

For this exemplification, the retracement reached the 50.00 % pull back area, but most of the time the bitcoin trading market will retrace upto 38.2 % and therefore most times traders set their buy limit bitcoin orders at the 38.2 % level, while the same time setting a stoploss just below 61.8 %.

How to Draw on a Downwards Bearish Market

In the diagram below the btcusd trading market is moving down between 1 and 2, then after 2 it retraces up to 38.20 % retracement then it continues heading downward in the original and initial downward trend. Notice that this technical indicator is drawn from point 1 to 2 in the direction of the bitcoin trend (Downwards).

Because we know this is just a pull back we put a sell order at 38.20% level & a stop loss just above 61.8%.

If you had put sell order at the 38.2% level like illustrated on the BTCUSD trade below you would have made a lot of pips afterwards. In this trade the retracement reached 38.20% point & did not get to 50.00% mark. From experience it is always good to use 38.2% because majority of the times the pull back does not always get to 50.00% mark.

Fibonacci Tool Drawn on Downward Bitcoin Trend

Explanation for the Above BTCUSD Example

The example above shows the perfect situation where the price of bitcoin goes back right after hitting the 38.2 % Level.

This level provided a lot of resistance for the pullback, this was the best place for an investor to place a sell limit bitcoin order as the btcusd trading market quickly moved down after getting to this level.

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