The Fibonacci grid can help uncover profitable trading strategies. While incorrect placement of the grid can lead to the wrong entry and exit points, the correct usage can help traders with their predictions.The grid supports retracement and extension analysis. A retracement occurs when a security’s price turns the opposite direction of the latest trend: either higher or lower. Extensions occur when prices clear the grid and push into new territories, either raising up or dropping down. Traders can improve their price predictions by using retracement analysis. Start by zooming out to a stock’s weekly pattern and finding its longest continuous up or down trend. Then place the Fibonacci grid over the chart, drawing horizontal lines indicating support and resistance at key Fibonacci ratios – 38.2, 50, 61.8 and 78.6 percent. The stock’s price can bounce between the first three ratios, but passing the 78.6 line is a trend change. Then move to shorter-term trends and add new grids over those time frames. The resulting series of grids can have a tight alignment, indicating profitable entry and exit points. Grids with a loose alignment indicate a level of disorganization, making predictions harder to make.