Fibonacci Fan

All trading applications have a number of tools that are necessary for analysis. This group is called “Fibonacci Tools”. These tools help you design your price map with high accuracy.

Among these tools are: • Fibonacci levels;
• Fibonacci extensions;
• Fibonacci fan;
• Fibonacci channels.
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These graphical models require correct construction, otherwise their readings will be incorrect and therefore ineffective.

The basis of the Fibonacci fan is the Fibonacci grid - these are three lines at levels equal to 38.2, 50, 61.8 percent. All lines originate from a common point, creating a grid of supporting and resisting lines. On the chart, these lines look like a fan.

To correctly build a grid, you need to calculate the minimum and maximum price points for a certain period. The main line, or also called the trend line, connects at two points. If the trend is just mastering the market, then the line is drawn starting from the minimum and up to the maximum value. If this reaction occurs the other way around, then if the trend is decreasing, then the line is drawn from the maximum to the minimum value.

Fibonacci levels are located at different angles, and they determine correction levels. Which are often used as guidelines for setting stop orders or when searching for entry points into the market.

The Fibonacci fan is very dynamic and therefore, when expanding, it is necessary to compare prices. This tool shows areas where the price may stop moving and likely move away from the existing movement.