Fibonacci ratios are a very popular tool among technical traders and are based on a particular series of numbers identified by mathematician Leonardo Fibonacci in the thirteenth century.
For some reason, these ratios seem to play an important role in the financial markets, just as they do in nature.
The Fibonacci fans are a charting technique consisting of diagonal lines that use Fibonacci ratios to help identify key levels of support and resistance. They can be used to determine critical points that cause price to reverse.
One of the most effective ways of using them is to determine the extent of a pullback. Due to its characteristics, one can estimate if a pullback will be a mere retracement, or will it turn into a reversal of the existing trend.