A retracement by itself does not say much. However, when combined with other technical indicators it can help a trader identify if the current trend is likely to continue or if a significant reversal is taking hold. A retracement should be used with other technical indicators and never alone.

Which timeframe is best for Fibonacci retracement?

Any time the market makes a significant movement a Fibonacci can be applied to that day or week. For this method I suggest that you use a chart with 30 or 60 minute candle sticks. This is a good time frame for watching the day to day swings in the market and for using Fibonacci Retracement.

How do you use retracement in trading?

Step 1 – Identify the direction of the market: downtrend. Step 2 – Attach the Fibonacci retracement tool on the top and drag it to the right, all the way to the bottom. Step 3 – Monitor the three potential resistance levels: 0.236, 0.382 and 0.618.