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What Is Fibonacci Fan And How It Works

What Is Fibonacci Fan And How It Works

Fibonacci fan is one of the technical analysis chart patterns traders in India uses to analyze market trends. Using the ratios given by the Fibonacci series, one can plot support and resistance levels using a Fibonacci fan.

How to Construct Fibonacci Fan

A trader draws a trend line, which serves as the fan’s base, before building a Fibonacci fan. This trend line usually forms an upward trend connecting the low and high prices of an asset over a given period of time. To determine retracement levels, the trader next divides the price difference between the low and high ends by ratios determined by the Fibonacci series. Typically, these ratios are 50%, 61.8%, 38.2%, and 23.6%. The starting point of the basic trend line is then joined to each of the three retracement levels that the ratios generate to create three additional trend lines. The Fibonacci fan pattern is the end result.

How to use Fibonacci in Trading

  • Identifying Price Targets: With the use of Fibonacci ratios and past price movements, it helps traders in predicting future price levels.
  • Finding Support and Resistance: The fan’s key levels help determine entry and exit positions and help with stop-loss orders.
  • Timing Entry and Exit Points: The fan’s lines help traders make strategic decisions by allowing them to assess the intensity and direction of trends.


Best Time Frame for Fibonacci Retracement

When performing technical analysis, most traders focus on the daily and hourly time frames. Most traders pay attention to the daily time frame than the 1-hour one. The daily time frame is the best for Fibonacci retracement levels.

Advantages and Limitations of Fibonacci Fan


  • Offers precise visual indicators for resistance and support levels.
  • Helps in identifying potential price targets.
  • Works well with additional tools for technical analysis.


  • May generate false signals, especially in volatile markets.
  • Needs experience and technical skill to simplify accurately.
  • Not universally applicable across all market conditions.

Fibonacci Retracement Strategy

The Fibonacci retracement approach is used by traders in a variety of ways:

  • Trend Continuation: Finding levels where trends are likely to continue using the Fibonacci fan.
  • Trend Reversal: Recognizing potential turning points where trends might reverse direction.


Technical analysis continues to rely heavily on the Fibonacci Fan, which uses accuracy in statistics to improve trading choices. Gaining proficiency with this tool can provide traders with valuable knowledge about market dynamics, but it’s crucial to acknowledge its limitations. Combining Fibonacci Fan with other indicators allows traders to build powerful strategies that will enable them to successfully navigate the intricate dynamics of the stock market.

Take advantage of our stock market course to become familiar with the workings of Fibonacci Fan. Whether you’re just starting out as a beginner or an experienced investor, Traders Platform can help you master Fibonacci Fan, improving your trading skills. Connect with us today to know more about our available advanced stock market courses and improve your technical trading tactics in the share market.

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