We are currently seeing a correction in BTC price right after hitting $49K and many traders are trying to explain this. Some of them use Fibonacci Retracement, but they are also divided into 2 sides:
+ The first side uses
the Arithmetic scale for price, they conclude that the price reversed from increasing to decreasing when it touched Fibo 0.618. This can be observed in history. In the Harmonic Trading method, Scott Carney also uses the Arithmetic scale.
+ The second side uses the
Logarithmic scale for the price, they conclude that the price reversed from increasing to decreasing when it touched Fibo 0.786. This can also be observed in history.
Maybe this is just a coincidence, but both of these approaches can explain and predict BTC's reversal. What fun!
I believe in the Logarithmic scale more because I think traders come to the market focusing only on profits in % of capital, instead asset price in terms of $.
However, I still think that the existence of a group of traders using the Arithmetic scale also creates price volatility when reaching Fibo levels on that scale.
So the reversal of price chart can be created from trading psychology of both Arithmetic & Logarithmic sides.
You usually use Fibonacci on the Arithmetic or Logarithmic scale? Is there any special basis or reason for that choice?