Fibonacci Retracement Levels And Trading Strategy

Fibonacci Retracement Levels And Trading Strategy!

What are Fibo retracement

What are Fibonacci Retracements?

Fibonacci,  Short term price corrections during an overall larger upward and downward trend. 

These short term price corrections are support and resistance levels and they don’t indicate a change in the direction of the larger trend.

By which you will consider your trades.

Price corrections

What benefits trading Fibonacci retracement provides!

The main benefits of retracement, they provide opportunities to profit by an entry in your original direction of the trend at a better price.

And just before the continuation of the move.

That original larger trend direction may be an upward or downtrend.

Upward and downward trend

Well, If you are going to trend in retracement so you must find a strong upward and downward trend by which trend continuation confirms.

The retracement is also called Pullback in an upward direction when we are considering buying any currency pair like GBPUSD.

Pullback and Rally

And the same as the retracement is called Rally in a downward direction when we are planing for selling any currency pair like USDJPY. 

How do we know when the market will Pullback? 

Fibonacci Retracement of Buy

Simply by using the Fibonacci Retracement tool and draw on the chart and decide and confirm by 50% retracement of support.

And then find high momentum bullish candle price action towards its original continuation direction.

Exit Strategy for buying entry on retracement

Place your Stop Loss below 50% retracement that is called support.

and keep at least 30 pips for trailing Stop and then won’t put for target profit if you’re using a trailing stop.   

Because we know that Fibonacci retracement use to forecast the market to trade and extension Fibonacci use for the reasonable  profit target                     

Fibonacci Retracement of Sell

Simply by using the Fibonacci Retracement tool and draw on the chart and decide and confirm by 50% retracement of Resistance.

And then find high momentum Bearish candle price action towards its original continuation direction.

Exit Strategy for Selling entry on retracement

Place your Stop Loss above 50% retracement that is called Resistance.

and keep at least 30 pips for trailing Stop and then won’t put for target profit if you’re using a trailing stop. 

The Fibonacci sequence.

The Fibonacci sequence starts with 0, 1, and 1 and adding the two most recent numbers.

In sequence to arrive at the next number in the sequence.

For example, if you take the first two numbers in the sequence, you get 0 + 1 = 1.

If you then take the two most recent numbers in the sequence, you get 1 + 1 = 2.

Repeating the process, you get 1 + 2 = 3, and so on.

The Sequence begins to take shape and ends up.

the sequence begins to take shape and ends up looking like this: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55 and so on.

The two most important ratios found within the sequence from an investor’s point of view.

They are 38.2 percent and 61.8 percent.

 These ratios also make very interesting appearances in the Forex market.

The first ratios we look at are those ratios investors utilize when forecasting retracement levels.

For example, the sequence goes…13, 21, 34, 55.

If you were to take 21 and divide it by the number two places higher than it in the sequence, 55.

You would get the ratio 38.2 percent (21 ÷ 55 = 0.382, or 38.2%).

 The second Support, Resistance, and Fibonacci 197 ratio, 61.8 percent.  

It is approximately the ratio of any number in the sequence divide by the number.

The sequence goes…13, 21, 34, 55.

If you were to take 34 and divide it by 55, you would get the ratio 61.8 percent (34 ÷ 55 = 0.618, or 61.8%).

Which are the ratios investors use when they are identifying support and resistance levels during retracements?

Fibonacci Retracement Levels

These ratios are most effective in projecting trend continuations.

The first ratio, 161.8 percent.

It is approximately the ratio of any number in the sequence divided by the number. directly preceding it in the sequence.

For example, looking at the sequence . . . 13, 21, 34, 55.

If you were to take 55 and divide it by 34, you would get a ratio of 161.8 percent (55 ÷ 34 = 1.618, or 161.8%).

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2 comments

  1. dear sir,
    it is very nice post regarding Fibonacci Retracement

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