 How to use the Fibonacci retracement tool when trading. The Fibonacci retracement can show levels of support and resistance. These levels can help you plan a price target and stop loss. To set up the Fibonacci retracement you need to set your first Fib at recent highs and then set your second Fib at recent lows. And that's how you set up a Fibonacci retracement if you're long on a stock. If you are short on a stock you're going to want to do the opposite. Set the first Fib at recent lows and set the second Fib at recent highs. For more educational videos make sure to click the link in our bio to join Xtraits today.