Fibonacci Fan

DEFINITION of 'Fibonacci Fan'

A charting technique consisting of three diagonal lines that use Fibonacci ratios to help identify key levels of support and resistance.

Fibonacci Fan

BREAKING DOWN 'Fibonacci Fan'

Fibonacci fans are created by first drawing a trendline through two points (usually the high and low in a given period), and then by dividing the vertical distance between the two points by the key Fibonacci ratios of 38.2%, 50% and 61.8%. The result of these divisions each represent a point within the vertical distance. The three 'fan' lines are then created by drawing a line from the leftmost point to each of the three representing a Fibonacci ratio.