I just realized that many people are still confused about Fibonacci. Even though the name is often heard, how to effectively use Fibonacci in trading is still not clear. So I want to share my understanding of this tool.

First of all, Fibonacci is a series of numbers connected as 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55... which, if you observe carefully, you'll see that the next number is the sum of the two previous ones. Its brilliance lies in the special ratios hidden in nature, from the spiral shells to the proportions in the Mona Lisa painting. Not just in art, but traders also use these ratios to predict prices.

This is where I find it interesting. When you apply Fibonacci to analyze prices, you'll get key values like 0.236, 0.382, 0.618, 1.618, and others. It's no coincidence; these are ratios that traders worldwide believe in and use, making them true support and resistance levels.

Talking about using Fibonacci in trading, I often use Fibonacci Retracement. When the price pulls back, I draw from the high to the low and look at where the price might stop. In an uptrend, I wait to buy at Fibonacci support levels. In a downtrend, I wait to sell at resistance levels. Fibonacci Extension is used when the price breaks out to find profit targets.

Another thing I like is combining Fibonacci with other tools like EMA or RSI. For example, I use EMA to identify the trend, then use Fibonacci Retracement to find entry points. If the price pulls back to test Fibonacci support but remains above the EMA line, I buy. This method helps me make more confident decisions.

The advantage of using Fibonacci is that it's easy to understand, read, and adaptable to many situations. But its limitation is that it is subjective; some traders find it effective, others do not. So, don't rely solely on Fibonacci; combine it with other confirmation tools.

For different scenarios, if the price moves within a range, I buy at Fibonacci support and sell at Fibonacci resistance. If there's a reversal point, I wait for the price to break out of the Fibonacci range in the opposite direction and confirm with candlestick patterns before entering.

In fact, Fibonacci works well because it is widely used—from retail traders to large funds—making these ratios a common belief among market participants. If you haven't tried using Fibonacci yet, try opening a chart and drawing the lines yourself. You'll see the picture much more clearly.