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Fibonacci calculator
The Invezz Fibonacci calculator helps you determine where to draw horizontal lines on a stock chart to signal potential areas of support or resistance for the stock you own. Read on to learn how our Fibonacci calculator works, and how it can help your investing strategy.
How to use our Fibonacci calculator
Copy link to sectionUsing our Fibonacci sequence calculator means following these steps:
- Enter High Price: Input the highest price point in your data range.
- Enter Low Price: Input the lowest price point in your data range.
- Calculate Fibonacci Levels: Click the "Calculate Fibonacci Levels" button. The calculator will compute and display the Fibonacci retracement levels.
- Review Fibonacci Levels: The results will show key Fibonacci retracement levels, which are used to identify potential support and resistance levels in trading.
How the Fibonacci calculator works
Copy link to sectionThe calculator works by using the Fibonacci sequence to work out where support and resistance lines are likely to fall on stock charts. Let’s say you buy a stock at £100 per share. The first retracement level on the Fibonacci scale is at 23.6% from the original price. That means that you would draw a line indicating a potential level of support 23.6% below your purchase price, which in this case would be at £76.40. You can do the same thing for a potential level of resistance, drawing a line at £123.60.
Why should I use it?
Copy link to sectionTo hone your investment strategy. Fibonacci numbers pop up everywhere in life and in nature. As a result, some traders (of stocks, cryptocurrencies, and other assets) believe that Fibonacci numbers can be highly relevant when investing too.
Moreover, estimating where support and resistance levels may lie can give you a better idea of how to react when a stock starts moving in one direction or another. For instance, if your goal is to make a profit of about 20% and your stock starts approaching that 23.6% level in its uptrend, that might be a good time to sell your entire position, or at least take some profits.
What is the Fibonacci sequence and how is it relevant to investing?
Copy link to sectionThe Fibonacci sequence is a set of numbers in which each is the product of the previous two added together (1,1,2,3,5,8,13,21,34…). These numbers crop up all over the world and are central to the mathematical equations used by investors to determine the likely movement of a stock’s price, and when a stock uptrend or downtrend might be coming to an end.
A stock uptrend occurs when shares of a company you own start heading higher. All uptrends (and downtrends) are by definition temporary. That means that using a Fibonacci calculator can help you figure out where potential points of support and resistance lie; if those levels get violated on either the upside or downside, it could be a sign that the stock’s uptrend or downtrend is over.