I just sat down to think about Fibonacci again, because it is one of the tools that many people talk about—but very few people truly understand how to use.

Actually, Fibonacci is simply a sequence of connected numbers: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34... and so on. It’s very easy to calculate: add the previous two numbers to get the next one, continuing like that. The amazing part is that no matter how you divide these numbers, you always get the same ratios. For example, 34 divided by 55 equals 0.618, or 377 divided by 233 equals 1.618. These are called the Golden Ratio, hidden in nature everywhere.

What’s interesting is that these numbers weren’t invented recently. They’ve existed since 400–200 BC, by Indian mathematicians, but the name Fibonacci was used during medieval Europe.

Even more interesting is applying fibo on trading charts—it really helps in finding entry points, support, resistance, and price targets. Traders use it to identify where to enter positions, where to place stop-loss levels, and where to take profits.

There are several types of Fibonacci tools to choose from. The first is **Fib Retracement**, used to find entry points when the price pulls back. By drawing lines connecting the lowest point to the highest point, you’ll get horizontal levels at 0%, 23.6%, 38.2%, 50%, 61.8%, and 100% based on the calculated Fibonacci ratios. These lines act as support and resistance levels.

The second is **Fibonacci Extension**, used to find price targets when the price breaks out. Draw from the swing high/low to the retracement point, and it will show extension levels such as 113.6%, 127.2%, 141.4%, 161.8%, 200%, and so on.

There is also **Fibonacci Projection**, which combines both of the above. It’s used to see how far the price might retrace or how far it could break out. There’s **Fibonacci Timezone**, which looks vertically using time variables to identify periods when swings may occur, and **Fibonacci Fan**, which combines both price and time.

Practicing fibo in practice isn’t as difficult as people think. When the price swings back in an uptrend, use **Fib Retracement** to find support: draw from Swing Low to Swing High, and you’ll see different support levels where the price is likely to retrace. In a downtrend, draw from Swing High to Swing Low to find resistance.

After the price breaks out, use **Fibonacci Extension** to find profit targets. Draw from the previous Swing High to the retracement point, and you’ll get different targets based on Fibonacci ratios.

In addition, it can be used for trading within a range: buy at the support levels and sell at the resistance levels indicated by Fibonacci. It can also be used as a reference point for trend reversals.

The advantage of using fibo is that it’s easy to use and easy to read, and it can be combined with many other tools. The downside is that it’s subjective. Some people use it and make profits, while others use it and end up with losses. You should use other tools to confirm it—Fibonacci shouldn’t be relied on by itself.

That’s why people commonly combine fibo with EMA to identify trend direction, with RSI to find exit points when divergence occurs, and with Price Action to confirm reversal points using candlesticks.

For drawing fibo on a trading platform, most of the time you just click the **Fib Retracement** icon and drag to connect the points you want. The system will generate the Fibonacci lines automatically, and you can adjust the settings as needed.

In the end, Fibonacci works because it has become widely popular and is used all around the world—from retail traders to large funds. This makes those ratios a shared belief among market participants, which is why it tends to work.

If you want to understand Fibonacci better, try opening and studying charts from real assets in a demo setting—it will help you see the picture much more clearly.