Fibonacci Fan

Fibonacci Fan is a technical analysis tool that uses Fibonacci ratios to identify potential support and resistance levels. It consists of a series of diagonal lines drawn on a price chart, representing the possible directions of price movement.

To construct a Fibonacci Fan, you need to select two points on a price chart: the starting point (usually a significant low) and the ending point (usually a significant high or vice versa). These two points define the trend that you want to analyze.

Once the two points are selected, the Fibonacci Fan tool plots several diagonal lines from the starting point, extending to the right side of the chart. These lines are drawn at specific Fibonacci ratios, typically 38.2%, 50%, and 61.8%. These ratios represent potential support and resistance levels where price may react or change direction.

The 38.2% line is the steepest line in the Fibonacci Fan, while the 61.8% line is the shallowest. The 50% line is drawn at a 45-degree angle.

The Fibonacci Fan tool is used to identify potential areas where price may find support or resistance as it continues its trend. If price approaches one of the fan lines, it may act as a support or resistance level. Traders often look for price reactions, such as bounces or breakouts, at these levels to confirm their analysis.

Fibonacci Fan lines can also be used to help determine potential price targets. Traders may project the distance between the starting and ending points onto the fan lines to identify possible future price levels.

It’s important to note that Fibonacci Fan is just one tool in a trader’s toolbox and should be used in conjunction with other technical analysis tools and indicators to increase the probability of accurate predictions.

In summary, Fibonacci Fan is a technical analysis tool that uses diagonal lines drawn at specific Fibonacci ratios to identify potential support and resistance levels. It helps traders visualize possible price movements and can be used to determine support and resistance levels as well as potential price targets.