How to construct Fibonacci levels in trading?

Fibonacci levels are a powerful tool in technical analysis that helps traders identify potential reversal points on a chart. To correctly construct Fibonacci levels, two key extremes must be chosen — the minimum and maximum. Then, using special lines, horizontal levels are drawn based on the numbers from the Fibonacci sequence. These levels help forecast where a price retracement or reversal might occur. Traders often use such levels to find optimal entry and exit points in the market.