The fluctuations of financial markets sometimes subtly coincide with the growth patterns of a flower or a shell. Today, let's talk about our commonly used toolbox's magical and practical tool—the Fibonacci retracement line.

What exactly is it?

Simply put, it is a set of percentage numbers based on the golden ratio, mainly: 23.6%, 38.2%, 50%, 61.8%.

The market is like climbing stairs; it won't go straight up or down in one go. After a big surge, it will always 'rest' and pull back a few steps; after a significant drop, it will also 'catch its breath' and rebound a little. The Fibonacci line helps you predict where this 'rest' is most likely to stop on which step.

How to use it? (Taking the example of a pullback after an uptrend)

1. Find a clear upward movement: Draw from the lowest point (A) to the highest point (B).

2. The system automatically generates 'steps': When drawing lines on trading software, those key percentages (38.2%, 50%, 61.8%) will appear like horizontal support lines.

3. Observation and action: When the price falls back from the high point B, at 38.2% (first buffer), 50% (the watershed between bullish and bearish), and 61.8% (golden ratio, strongest support), these positions are most likely to encounter bullish resistance, with the highest probability of stabilizing and rebounding.

Core principle:

· It is not a crystal ball: Do not assume the price will precisely stop at any line. It is a 'key focus area.'

· The key is 'confirmation': When the price reaches these areas, it should be combined with other evidence, such as:

· The K-line shows obvious signs of stopping the decline (such as long lower shadow, bullish engulfing).

· Trading volume shrinks and then expands again.

· Other indicators like RSI show oversold. Wait for clear signals before acting.

· Always protect yourself: If the price sharply breaks below the 61.8% critical defense line, it usually means this is not a 'pullback'; the trend may truly be weakening, and it is time to cut losses.

In summary:

The Fibonacci retracement line is the 'ruler' of the market's collective psychology. It helps you outline key positions where a high probability of market competition will occur in advance, allowing you to shift from 'blindly guessing the bottom' to 'waiting for the market to give you answers in advantageous positions.'