Fibonacci retracement is a tool used in price analysis to identify potential support and resistance levels in an asset’s price movement. It is based on the Fibonacci sequence, where each number is the sum of the two preceding ones. Key levels often considered are 23.6%, 38.2%, 50%, 61.8%, and 100%.Traders apply Fibonacci retracement by selecting a significant price point, such as a recent high and low. The tool then divides the vertical distance between these points based on the Fibonacci levels, allowing traders to anticipate areas where the price may reverse or consolidate.When an asset experiences a price pullback after a strong move, these retracement levels can help identify potential entry points for buying or selling. If the price approaches a Fibonacci level and shows signs of bouncing back, it may indicate strong support. Conversely, if the price breaches a Fibonacci level, it could reinforce the trend and suggest further movement in that direction.