Setting Fibonacci on a technical chart may seem complicated, but it's actually not that difficult. I’ve seen many people wonder what Fibonacci is and how to use it effectively, so I want to share the experiences I’ve learned.

First, you need to understand that Fibonacci is a sequence of numbers connected as follows: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, and so on. The simple way to calculate is to add the two previous numbers to get the next one. The magic is that no matter how you perform mathematical operations with these numbers, the ratios remain consistent. For example, 34 divided by 55 equals 0.618, or 377 divided by 233 equals 1.618. These ratios are called the golden ratio.

What’s interesting is that Fibonacci is hidden everywhere in nature—shells, pine cones, sunflower curves. Even the proportions in Leonardo da Vinci’s Mona Lisa are said to incorporate Fibonacci. In fact, Fibonacci numbers were discovered over 400 years before Christ by Indian mathematicians.

Now, for traders, the most commonly used Fibonacci tool is Fibonacci retracement, which helps identify entry points during a price correction. To use it, you draw the tool from the lowest point to the highest point, and horizontal lines will appear at levels like 23.6%, 38.2%, 50%, 61.8%, and 100%. These lines act as support and resistance levels calculated from Fibonacci ratios.

Another useful tool is Fibonacci extension, which helps find target prices when a breakout occurs. It calculates extension levels from the retracement, giving levels like 113.6%, 127.2%, 141.4%, 161.8%, and beyond. There’s also Fibonacci projection, which combines retracement and extension to show both pullback and extension points simultaneously.

To set Fibonacci on a trading platform, most just click the icon on the toolbar, select Fibonacci retracement, then drag from the desired points. The system will display Fibonacci lines at preset levels. If you want to adjust the levels, just click on the tool and go into settings to change them as needed.

In practice, I like to combine Fibonacci with EMA (Exponential Moving Average) to confirm trends. First, use EMA to identify trend direction: if the price is above EMA, it’s an uptrend; below EMA, it’s a downtrend. Then, wait for a correction, and use Fibonacci retracement to find support and resistance levels. Buy signals occur when the price approaches the 23.6%, 38.2%, or 50% support levels without breaking below the EMA.

Another good method is combining Fibonacci with RSI (Relative Strength Index) to find exit points. Use Fibonacci extension to identify support and resistance levels, then confirm with RSI divergence. When the price hits a Fibonacci level and RSI shows bearish divergence, it’s a sell signal. Conversely, bullish divergence indicates a buy.

Sometimes I also use Fibonacci with price action to confirm reversals. After setting Fibonacci retracement, I wait for candlestick patterns indicating reversal, such as doji or double top. If these patterns appear near Fibonacci levels, it’s a strong signal.

The truth is, Fibonacci doesn’t always work perfectly. Price movements are influenced by many factors and constantly change. However, this tool remains useful because Fibonacci is popular and widely used—from retail traders to large funds—making these ratios often act as reliable support and resistance levels.

One downside is that Fibonacci is quite subjective; traders use different methods. Some profit, others lose. Relying solely on Fibonacci may not be precise; it’s best to combine it with other tools to increase confidence. Therefore, use Fibonacci as a supplementary tool, not the main decision-maker.

When you try applying Fibonacci on your charts, you’ll see it helps you better understand price movements. Start by setting Fibonacci on a 15-minute or 1-hour chart, then observe how the price reacts when approaching different Fibonacci levels. With consistent study and practice, you’ll find Fibonacci becoming a valuable part of your trading toolkit.