Retracements

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Trading instruments usually retrace the previous day’s trades. The most popular retracement is the Fibonacci Retracement indicator which is a chart tool used to determine the support and resistance levels of an instrument.

The Fibonacci Retracement levels are created by drawing a trend line between two extreme points and then splitting the vertical distance according to the specified percentages.

The Fibonacci Retracement can include up to 13 lines. In order to find these retracement levels, you need to identify the recent Swing Highs and Swing Lows (extreme changes in the trend direction).