Pullbacks are short moments of market reconciliation that happens when the market is rising upward. Traders look for pullbacks in their trading strategies to plan entry. The policy is to buy low and sell high. So, when the price dips during pullback, traders enter the market. Now, they need to eliminate chances of trend reversal when the pullback happens. For that, they use Fibonacci Retracement.
Fibonacci Retracement helps position traders to identify when to open or close position. They would draw Fibonacci Retracement lines on the price chart at 61.8, 38.2 and 23.6 percent. Positional traders use these lines to identify support and resistance lines and apply for identifing trading opportunities.
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