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How you can use Fibonacci Projection to find stock target price

It is used to help traders get in at a good price by identifying strategic places for transactions, stop losses or target prices

July 07, 2019 / 07:56 AM IST

The Fibonacci Projection is a popular tool among technical traders and is based on the key Fibonacci number series.

The basic idea behind Fibonacci Projection is that markets will retrace a predictable portion of a move, after which they will continue to move in the original direction and will extend above the earlier swing high.

It is also used for determining support and resistance levels. Fibonacci Projections are ratios used to identify potential reversal levels and the most popular Fibonacci Projections are 161.8 percent and 261.8 percent.

It is used to help traders get in at a good price by identifying strategic places for transactions, stop losses or target prices. However, it is most effective for confirming signals or conditions identified by additional technical analysis tools.