Navigating the Uncertainties of Fibonacci Retracements in Crypto

7. Apr. 2023

Hello, TradingView community! I'm Vestinda, and I'm thrilled to share an informative article with you today about Fibonacci Retracements.

While they can be useful tools for traders and investors in financial markets, it's important to note that they are not infallible and may not always produce the desired outcomes.



As discussed in our previous post, Fibonacci support and resistance levels are not infallible and may occasionally break. It is essential to remain vigilant and use these levels in conjunction with other technical indicators and market analysis to make informed trading decisions.

While Fibonacci retracements can be a useful tool in technical analysis, it is crucial to exercise caution and not solely rely on them as the sole basis for trading decisions.



Unfortunately, Fibonacci retracements are not infallible and may not always work as expected.


Let us examine a scenario where the Fibonacci retracement tool proves to be ineffective in technical analysis.


To make a prudent trading decision amidst the ongoing downtrend of the pair, you make a strategic choice to leverage the Fibonacci retracement tool. With meticulous attention to detail, you designate the swing low at 3,882 and the swing high at 10,482 for precise determination of a Fibonacci retracement entry point.

The BTC/USD Daily chart is shown below.



Upon careful analysis, it is evident that the pair has rebounded from the 50.0% Fibonacci retracement level for multiple candles. As an astute trader, you recognize this crucial pattern and conclude that it is a viable opportunity to enter a short position.

You thoughtfully consider, "This particular Fibonacci retracement level is showing remarkable resilience. It is undoubtedly a lucrative moment to short it."

You may have been tempted to take a short position in anticipation of profiting from the downtrend of the pair, while simultaneously daydreaming of cruising down Rodeo Drive in a Maserati.
However, if you had placed an order at that level without proper risk management, your hopes of profit would have quickly dissipated as your account balance plummeted.

Observing the price action of BTC, let's examine what occurred next.



Indeed, the price action of BTC demonstrates that the market is constantly evolving, and traders must be prepared to adapt to these changes.

As shown in this specific case, the price not only climbed close to the Swing High level, but the Swing Low marked the bottom of the previous downtrend. This serves as a prime example of the significance of flexibility in the dynamic realm of cryptocurrency trading.



What can we learn from this?


In the world of cryptocurrency trading, Fibonacci retracement levels can be a useful tool to increase your chances of success. However, it's important to understand that they are not foolproof and may not always work as intended. It's possible that the price may reach levels of 50.0% or 61.8% before reversing, or that the market may surge past all Fibonacci levels.

Additionally, the choice of Swing Low and Swing High to use can also be a source of confusion for traders, as everyone has their own biases, chart preferences, and timeframes.


In uncertain market conditions, there is no one correct course of action, and utilizing the Fibonacci retracement tool can sometimes feel like a guessing game. To improve your chances of success, it's crucial to develop your skills and use Fibonacci retracements in conjunction with other tools in your trading toolkit.




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