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Fibonacci Retracement

Fibonacci Retracement StrategiesFibonacci retracements are a cornerstone in the toolkit of many traders, offering a mathematical approach to identifying potential areas where reversals may occur. This article delves into the intricacies of using Fibonacci retracements, covering everything from basic understanding to strategies involving other indicators. Read on to gain insights into how to effectively incorporate these levels into your trading strategy. What Are Fibonacci Retracements? Fibonacci retracements are a popular technical analysis tool used to identify potential support and resistance levels on a chart. Developed around the concept of the Fibonacci sequence—a series of numbers where each number is the sum of the two preceding ones—the Fibonacci indicator applies this mathematical formula to financial markets. Key retracement levels are often considered at 38.2%, 50%, and 61.8% of a price move. The 61.8% level, in particular, is frequently referred to as the Fibonacci retracement golden ratio, owing to its significance in both nature and financial markets. Traders commonly use these areas to anticipate where the price may reverse, thus providing strategic entry and exit points. Fibonacci Retracements: How to Use Them Using the Fibonacci tool for trading begins with identifying a significant swing, either an uptrend or a downtrend, on the chart. The tool is then applied at the swing low and swing high of the price movement. In an uptrend, it starts at the swing low and ends at the swing high; in a downtrend, it's the opposite. This action plots horizontal lines at the key Fibonacci levels, providing potential areas where price could reverse. Concerning the Fibonacci retracement time frame, it's essential to know that this tool can be applied across various time frames—from one-minute charts to monthly charts. However, the reliability of the retracement levels often increases on higher time frames. That means those plotted on daily or weekly charts generally offer stronger support or resistance compared to those on shorter time frames. Strategies Using Fibonacci Retracements In trading, combining Fibonacci retracements with other technical indicators can significantly enhance decision-making. Below are three distinct strategies that utilise these retracements in conjunction with other tools to identify high-probability trade setups. To see how they work, consider following along in FXOpen’s free TickTrader platform. There, you’ll gain access to over 1,200 trading tools—including the ones featured in this article. Fibonacci Retracement with Moving Average Crossover In this Fibonacci trading strategy, traders combine Fibonacci retracements with two Exponential Moving Averages (EMAs) set to 9 and 12 periods to pinpoint entry and exit points. After identifying a trend, either bullish or bearish, they apply the retracement tool to gauge potential reversal zones. Specifically, the focus is on the 38.2%, 50%, and 61.8% retracement levels. If the price reacts at any of these zones—potentially confirmed by a bullish or bearish candlestick pattern—the next step is to observe the EMA indicators. Entry Traders often watch for a moving average crossover in the direction of the existing trend as an indication of potential entry. Stop Loss Stop losses may be placed above or below the nearest swing high or low. Alternatively, some opt for setting it beyond the next level, including 23.6% or 78.6%. Take Profit Profits are typically taken at the high or low of the retracement zone where the price initially reacted. Fibonacci Retracement with Stochastic Oscillator In this Fibonacci retracement strategy, the initial setup is similar to the one involving moving averages: traders identify a prevailing trend and apply Fibonacci retracements to find possible reversal zones at 38.2%, 50%, and 61.8%. The twist here is the use of the Stochastic Oscillator, a momentum indicator that ranges between 0 and 100. The oscillator helps identify overbought or oversold conditions when the price reaches these areas. Entry Traders generally look for the Stochastic Oscillator to exceed 80 (overbought) or drop below 20 (oversold) when the price reaches one of these Fibonacci zones. The entry signal often comes when the oscillator crosses back below 80 or above 20 after a reaction. Stop Loss Stop losses can be situated either above or below the closest swing high or swing low. Some traders may also choose to place it beyond an adjacent level, such as 23.6% or 78.6%. Take Profit Take profits are commonly located at the level where the price first exhibited a reaction, be it a high or a low. 50% Fibonacci Retracement Strategy The 50% Fibonacci retracement strategy is a lower risk-to-reward approach but one that’s simple. Unlike other strategies that utilise multiple Fibonacci levels or additional indicators, this method zeroes in on the 50% mark as the focal point for entry, making it straightforward for traders. The 50% point specifically plays into the idea of mean reversion, which states that the price is likely to return to its average over time; however, traders can choose 38.2% or 61.8% areas if preferred. Entry Traders typically look to enter a position when the price reaches and reacts from the 50% retracement level, aiming to ride an existing trend. Stop Loss Due to the wider scope of this strategy, stop losses are usually set beyond the high or low of the entire Fibonacci retracement, offering a buffer against potential volatility. Take Profit Traders often opt to take profits at key support or resistance areas that offer at least a 2:1 reward-to-risk ratio. Alternatively, one may choose to forgo setting a take profit and instead trail a stop loss above or below new swing points that develop. The Bottom Line In summary, understanding and applying Fibonacci retracements can enhance your trading strategies, especially when used in conjunction with other technical indicators. These retracement levels offer high-probability zones where price might reverse, creating potential entry and exit points. If you're looking to implement a Fibonacci forex strategy in a secure, low-cost trading environment, consider opening an FXOpen account to access over 50 currency pairs and a comprehensive range of trading resources. This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Education
by FXOpen
4
Fibonacci Retracement/Extensions- How & Why? | Live ExampleFibonacci retracements in technical analysis of various assets use a mathematical sequence discovered by Italian mathematician Leonardo Fibonacci. This sequence is a series of numbers where each number is the sum of the two preceding ones: 0, 1, 1, 2, 3, 5, 8, 13, 21, and so on. In stock trading, Fibonacci retracements are used to identify potential levels of support or resistance during price corrections. Imagine you have a stock that has been rising in price for some time. Suddenly, it starts to decline. Traders who use Fibonacci retracements believe that during this downward movement, the stock price will likely retrace or bounce back to certain levels before continuing its downward trend. These retracement levels are derived from the Fibonacci sequence. The most commonly used levels are 38.2%, 50%, and 61.8%. For example, if a stock's price drops from 100 to 80, traders would expect it to bounce back to around 88.20 (38.2% retracement), 90 (50% retracement), or 93.20 (61.8% retracement) before continuing its decline. While their effectiveness is debated just like any other tool, many traders including myself believe that these levels act as psychological support or resistance points due to the large number of market participants who follow this approach. Let us get back on the example above. I drew a trendline which had helped me back in 2021 to predict the top in GOLD. This is the perfect example of how EVERY PRICE movement matters. The Fibonacci levels are derived from levels from 2008. In this example the Fibonacci extension level 3.618 held as a perfect resistance for the price of GOLD. 2008 to 2023, isn't this amazing? How long can a single price movement can have its affect! How to draw a Fibonacci Retracement/Extension? It's fairly simple. Just plot one end of the fib to the high of the price movement and the other to the low or vice versa. I'll answering all your queries in the comments below. Please feel free to reach out!
TVC:GOLDEducation
by YieldYogi
2
Advanced Bull Flag ConceptsHave you ever wondered why price action sometimes forms a bull flag pattern? Have you ever wondered if there is a way to predict whether a bull flag will break out before it actually does so? In this post, I will try to address these questions by presenting a couple of theories about the nature of bull flags. Bull Flag Theories (1) The flag structure of a bull flag tends to form along Fibonacci levels, with the ideal flag proportion being an approximated golden ratio to the flagpole; and (2) Fibonacci and regression analyses can provide useful insight into whether price will successfully break out of its bull flag pattern, sometimes long before price even attempts to do so. I will try my best to clearly explain both theories in detail below. Note: Although this analysis is also generally true for bull pennants, bear flags, and bear pennants, to keep things simple I will focus solely on bull flags. Additionally, this analysis is generally true across timeframes. Part I - The Basics of a Bull Flag First, let's begin with the basics. As shown in the image below, bull flags form when an asset is in a strong uptrend. The uptrend forms the flagpole of the bull flag structure. The flag structure forms when price consolidates, usually in a falling trend. This consolidation phase is often characterized by price oscillators rotating back down while the price retraces only a small part of its prior upward move. From a market psychology perspective, bull flags often form when most market participants who bought the asset continue to hold it expecting the uptrend to resume, while only a minority of market participants sell (or short the asset) as its price corrects downward. The bull flag pattern is a continuation pattern because it reflects the market's general expectation that price will eventually resume its upward move. Once the price definitively breaks above the upper channel of the flag (often with strong momentum and high volume), the bull flag pattern is validated. Upon breakout, the expected move up is equal to the vertical height of the flagpole. Part II - The flag structure of a bull flag tends to form along Fibonacci levels, with the ideal flag proportion being an approximated golden ratio to the flagpole Here's where things begin to get interesting. Below is the golden ratio. Two quantities, a and b (where a > b ), form the golden ratio if their ratio is the same as the ratio of their sum to the larger of the two quantities. (See the equation below) The equation above shows the Greek letter phi which denotes the golden ratio. Phi is equivalent to a/b when such ratio is also equivalent to (a + b)/a. Although bull flags can take various forms, it is my hypothesis, based on chart analysis and research, that the most perfectly structured bull flags (ones that also have the highest probability of successful breakouts) occur when the flag forms a golden ratio to the flagpole. Mathematically, this means that the vertical height of the flagpole is equivalent to (a + b) and the vertical height (i.e. the width) of the flag is equivalent to b. This is also to say that price retraces down to the 0.382 Fibonacci level as measured by applying Fibonacci retracement levels along the flagpole (or to the 0.618 point on the vertical height of the flagpole if one measures from the bottom to top). I realize that this can be quite confusing, so let’s walk through some visualizations. Let's first visualize this hypothesis using the golden rectangle. Below is an image of the golden rectangle. A golden rectangle is composed of a square (with sides equal to a) and a smaller golden rectangle (with width equal to b and length equal to a). Now let's rotate the golden rectangle to better visualize the hypothesized flag pattern. The bull flag is hypothetically an approximation of the golden rectangle, whereby the width of the flag is in a golden ratio approximation to the length of the flagpole. In the illustration below, there are multiple bull flags contained within a Fibonacci spiral. The spiral is made up of golden rectangles, with each larger golden rectangle containing a smaller golden rectangle inside it. The smaller golden rectangle is the flag structure, and the length of the larger golden rectangle is the flagpole. One can think of the Fibonacci spiral and the golden rectangles as a series of bull flags that build on top of each other in a repeating pattern. In this diagram, price is represented by the increasing length of the sides of each golden rectangle. In other words, the price on a chart can be seen as spiraling higher after each bull flag breakout. Of course, not all bull flags form a structure that approximates the golden ratio, but it is my belief that in forming a bull flag, price action is aspiring to achieve as close of a golden ratio approximation as it can. I believe that the bull flags that best approximate the golden ratio structure also present the highest probability for a successful break out. To learn more about Fibonacci spirals, including the golden spiral that Fibonacci spirals approximate, you can check out this Wikipedia article: en.wikipedia.org Part III - Fibonacci and regression analyses can provide useful insight into whether price will successfully break out of its bull flag pattern, sometimes long before price even attempts to do so. To see how Fibonacci levels and regression analysis can give insight into whether a bull flag will break out or break down before it does so, let's consider an example. Let’s consider the massive bull flag that the iShares Russell 2000 ETF (IWM) formed in 2021. In 2021, the monthly chart of IWM formed what appeared to be a bull flag, as shown below. Now let's see why Fibonacci analysis and regression analysis were warning that this bull flag was not likely to break out successfully. First, IWM's price did not retrace to a Fibonacci level before attempting a breakout (when using the pole as the Fibonacci retracement reference point). In the chart below, we see that price tried to break out, without even so much as retracing down to the highest Fibonacci retracement level: $196.71. By not undergoing Fibonacci retracement, price did not give its oscillators the opportunity to rotate back down fully. Instead, price remained overextended at the time it attempted to break out. Now let's look at regression analysis. Below is a log-linear regression channel that contains IWM's entire price history. As noted in my prior posts, a regression channel simply indicates how far above or below the mean (or average) price an asset's current price is trading. In the regression channel above, the red line is the mean price, the upper channel line is 2 standard deviations above the mean, and the lower channel line is 2 standard deviations below the mean. A successful breakout of the bull flag would have taken IWM's price way above its regression channel, to a level that is too many standard deviations above its mean price for us not to question the probability of the breakout’s success. Achieving the full measured move up would have been extremely unlikely, assuming that the regression channel is valid and that price tends to revert back to its mean over time. What was more likely than a breakout was a breakdown, and a reversion back to the mean, which is what ended up happening with IWM. Another interesting note about IWM’s bull flag is that it presented a false breakout in November 2021. This false breakout was presenting multiple warnings signs including being a UTAD test of a Wyckoff Distribution. As shown below, however, another important clue that the November 2021 breakout would likely fail was that the breakout was not confirmed when comparing IWM to the money supply (M2SL). See the chart below. One can interpret this chart to mean that in late 2021, IWM’s price was rising because the central bank was increasing the money supply, but not due to improving strength of the underlying companies that comprise the ETF. Using the money supply as a ratio to an asset elucidates the true inherent strength of the asset's value. To understand more about why the money supply can be used in this manner, you can check out my post below. Part IV - Additional Comments I have a few additional comments. I usually use Fibonacci levels on a log-scale chart to identify Fibonacci spirals because Fibonacci spirals are logarithmic spirals. However, when using Fibonacci levels based on log scale, the ratios, percentages and numbers, can seem quite confusing because they are logarithmically adjusted. If you choose to replicate my process, please be mindful of this. While using log-scale charts is critical for higher timeframes (e.g. the monthly chart or higher), I have not identified much benefit to using it on shorter timeframes. In a prior post, I noted that Plug Power (PLUG) is currently forming one of the best-looking log-scale, golden ratio bull flags I have ever seen. If my above hypotheses are true, I would expect to see PLUG move dramatically higher in the years to come. For more information about PLUG, you can read my post linked below. (This is not a solicitation to buy PLUG. Please do your own research and carefully consider all risks.) At the risk of making this post too long and too dense, I just want to briefly note that it is also my hypothesis, based on observation and research, that the golden ratio is where many S-curve dilemmas are solved. If you don't know what an S-curve dilemma is and you'd like to read about this you can see my post below about Jumping S-Curves . In short, an S-curve dilemma is another way of conceptualizing the question of whether a bull flag will break out or break down. I hope that someone finds value in this post. I spent a lot of time studying, researching, analyzing, and cogitating the mathematical nature of price action to reach many of the conclusions here. Thank you for your valuable time in reading my post.
AMEX:IWMEducation
by SpyMasterTrades
51
How to Profit from Trend Exhaustion - XAGUSDHow much ... and when? What else is there to know? Enjoy this multi-timeframe tour of the XAGUSD chart to learn how I find MAJOR reversals and targets BEFORE price action reaches them. As always, I strive to produce charts that speak for themselves, and yet this is my video debut here on Tradingview, and I could not be more pleased to narrate this unusual experience. If you enjoy it or, better yet, if you learn from it, then consider this a preview of forthcoming weekday morning livestreams, which I hope you will follow. Until then, be liquid!
OANDA:XAGUSDEducation
by TheLeadingIndicator
4
Bitcoin's Recent Battle with Fibbonaci🛡️Hey there, crypto enthusiasts! Let's take a closer look at the recent Bitcoin pump that didn't quite take off as expected. It turns out, we encountered a significant resistance level at the 0.5 Fibonacci retracement on the Fibonacci retracement tool. 📊💡 🌐 The Fibonacci Fascination: Before we delve into the recent action, let's touch on the golden tool of technical analysis – the Fibonacci retracement. It's a tool that helps traders identify potential support and resistance levels on a chart based on the Fibonacci sequence. 💰 The Golden Ratio: In this case, we're talking about the golden Fibonacci retracement, the 0.5 level. This level is often seen as a crucial point on the chart. When an asset like Bitcoin retraces to this level, it can act as either strong support or resistance. 📈 The Recent Pump: Bitcoin recently experienced a significant price pump, and many were hopeful that it might lead to a substantial rally. However, the price action encountered resistance right around the 0.5 Fibonacci retracement level. 🛡️ The Battle at 0.5: This level represents a critical point where traders and algorithms make decisions. It can be a make-or-break point for a potential bullish run. 📊 Fibonacci in Action: To use Fibonacci retracement, simply select the tool on your trading platform, and then click on a significant swing low and drag to a swing high. The tool will automatically plot the retracement levels, including the golden 0.5 Fibonacci retracement level. 📚 Fibonacci Tips: When using Fibonacci retracement, keep these tips in mind: Look for confluence with other technical indicators. Consider it a tool in your trading toolbox, not a standalone strategy. Combine it with your overall trading plan and risk management. Remember, while Fibonacci retracement is a powerful tool, it's not foolproof, and market dynamics can change rapidly. Stay informed, stay adaptable, and keep honing your trading skills. 🔄📈
Education
by AlexWhale
Magic of Fibonacci Levels ✨In the realm of technical analysis, few tools capture the imagination of traders as effectively as Fibonacci retracements and extensions. Derived from the famous Fibonacci sequence, these levels offer insights into potential price reversals, extensions, and trend continuation points. In this article, we'll delve into the world of Fibonacci levels and explore how to use them to enhance your trading decisions. Understanding Fibonacci Retracements: Fibonacci retracement levels are like hidden treasures ✨ along a price trend. These levels, calculated from a swing high to a swing low, create horizontal lines that indicate potential support and resistance levels. The most common retracement levels are 23.6%, 38.2%, 50%, 61.8%, and 78.6%. How to Use Fibonacci Retracements: Identify a Trend: 📈📉 Begin by spotting a clear trend, either upward or downward. Select Swing Points: 🏞️ Locate the pivotal swing high and swing low within the trend. Plot Fibonacci Levels: 📏 Put those retracement levels on your chart, and watch as they highlight potential support or resistance areas. The Application: Support Levels: 💪🛡️ During an uptrend, traders often see retracement levels as potential buying zones. Resistance Levels: ☔ In a downtrend, these levels can be seen as possible areas to consider short trades. Understanding Fibonacci Extensions: Fibonacci extensions act like a crystal ball 🔮 projecting potential price targets or levels where the trend might extend. Extension levels include 161.8%, 261.8%, and 423.6%. How to Use Fibonacci Extensions: Identify a Trend: 📈📉 As with retracements, spot a well-defined trend. Select Swing Points: 🏞️ Determine the significant swing low and swing high within the trend. Plot Fibonacci Extension Levels: 📏 Add those extension levels to your chart, projecting potential price targets. Few examples : The Application: Projection of Trend Continuation: 🚀 Fibonacci extensions hint at where a trend might continue in its existing direction. Price Targets: 🎯 Traders often utilize extension levels to pinpoint potential price areas before a reversal might occur. Conclusion: Fibonacci retracements and extensions are like wizardry in the trader's toolkit. By grasping these levels and their applications, traders can create more informed strategies for entry, exit, and target levels. Remember, while Fibonacci levels are magical, they work best when combined with other technical indicators and chart patterns. As with any trading strategy, practice, experience, and risk management remain essential. With careful consideration and diligent analysis, Fibonacci levels can sprinkle a touch of enchantment to your trading endeavors. 📊✨
Education
by Yaroslav_Krasko
Mastering Elliott Wave: The importance of channelingI wanted to share my thoughts on the significance of using channeling technique in Elliott Wave theory when analyzing charts. To begin, we draw what we call a "base channel," starting from the beginning of wave 1 and extending it to the end of wave 2. This initial channel provides us with a foundation for analysis. The following occurrence of an impulsive breakout beyond this channel signals the initiation of wave 3. At this point, we create a new "Acceleration Channel" to track the movement of wave 3. If this newly drawn channel is breached to the downside, it suggests the possibility of a correction for wave 3 underway. As seen in the picture, the original base channel we drew earlier now acts as a support level for wave 4, accompanied by consolidation around Fibonacci levels. This observation has been witnessed numerous times in the past. When the corrective channel experiences a breakout with above-average volume, it serves as a signal indicating the completion of wave 4. This event provides an opportunity for us to establish Fibonacci targets for profit-taking. In this particular example, I have chosen to draw the corrective channel only on the final leg of the ABC correction, enabling us to catch the breakout at an earlier stage. A more conservative approach, however, would involve waiting for the breakout to occur after wave B has been surpassed. Hope this was helpful for those wanting to learn more about channeling and Elliott Wave.
TVC:GOLDEducation
by Ingvar77
Market Direction - Trend StrengthThe strength of a trend can be a key factor in predicting future price movements. This post will specifically cover how to identify trends, how to determine trend strength, and how to use it to your advantage when trading the markets. Characteristics of a Trending Market To begin, let us understand how to identify a trending market. A trending market is a market that is either making higher highs followed by higher lows (UPTREND) or lower lows followed by lower highs (DOWNTREND). What does this typically look like? Let's see: Uptrend Downtrend Now that we understand how to identify uptrends and downtrends, let's delve further and discuss how to use trend strength to your advantage when trading the markets. Fibonacci Retracement Tool The Fibonacci retracement tool is used in trending markets to determine how strong the trend is. It uses natural numbers to determine the high-probability price levels that the market will hit and continue in its initial direction. This method will use four Fibonacci levels: 38.2%, 50%, 61.8%, and 78.6%. One thing to mention is that in a trending market, the chart is made up of two waves: impulsive and retracement. After an impulsive wave, a retracement wave will usually form; after a retracement wave, the impulsive wave will usually form. The impulsive wave represents the strong momentum of buyers and sellers. The retracement wave shows the weakness of buyers and sellers. Therefore, we must look at the retracement wave when it comes to deciding the strength of a trend. For example, in an uptrend, the impulsive wave will be bullish; therefore, the retracement wave will be bearish. In a downtrend, the impulsive wave will be bearish; therefore, the retracement wave will be bullish. The retracement wave shows the strength of the opposite side of the market. For example, if the impulsive wave is bullish, buyers are stronger. Then, in the retracement wave, sellers will try to dominate the buyers. Therefore, the deeper the retracement goes, the stronger sellers will be than buyers, and the weaker the bullish trend strength will be. With the Fibonacci retracement tool, there are three scenarios to determine trend strength: Strong Trend Strength: 38.2% Fibonacci Retracement Moderate Trend Strength: 50%–61.8% Fibonacci Retracement Weak Trend Strength: 78.6% Fibonacci Retracement The above examples show why the Fibonacci retracement tool can be extremely effective in determining not only how strong a trend is, but also how likely it is to continue past the beginning of the impulsive wave. Bollinger Bands Bollinger Bands are very effective in reading trend strength. Bollinger Bands are based on price volatility, which means that they expand when the market is trending and there are big prices, and they contract during sideways consolidations when the market ranges. Bollinger Bands consist of two outer bands (top and bottom bands) on each side and a moving average in the centre between the outer bands (middle band). One of the main reasons Bollinger Bands are so effective in reading trend strength is that they do not lag as much as other indicators because they always change automatically with the price. Three important points to note when using Bollinger Bands to read trend strength: If price pulls away from the outer band and heads towards the middle band as the trend continues, this is a key indication that the trend strength may be weakening. During strong trends, prices stay close to the outer band and significantly away from the middle band. Repeated pushes into the outer bands that do not actually reach the band indicate a lack of trend strength. Let's see a chart example of Bollinger Bands reading trend strength: As you can see, using Bollinger Bands can provide traders with very useful information about trend strength and the balance between bulls and bears. Price Rejection We do not always need indicators or tools to read trend strength; it is possible to do this just by looking at a naked chart. The way rejected continuations or reversals happen on charts can be a huge indicator of being able to read trend strength. Before understanding the price rejection, it is important to know about the wick or shadow of the candlestick. Upper wick The upper shadow shows that the price went up and then came down again. This indicates that buyers wanted to increase the price, but sellers dominated the buyers to push the price back down. Lower wick The lower shadow represents that the price went down and then came back up. This indicates that sellers wanted to lower the price, but buyers dominated the sellers to push the price back up. Identifying price rejection Traders should first wait for the price to reach a strong support or resistance level. Then, at the support or resistance level, candlesticks will likely make wicks opposite the trend due to the strength of the level. For example, wicks or shadows will form on the upper side at the resistance zone, while at the support zone, wicks or shadows will form on the lower side of the candlesticks. These wicks or shadows are identified as price rejections in the market. Price rejections are very important, especially in identifying trend strength, because they accept or reject the identification of key levels in the market. For example, if you are unsure whether a support zone will hold or break, you can see whether price rejection will occur at that level. Let's see a chart example of price rejection and how you can use it to identify trend strength: The chart above is proof alone that trend strength can be identified by just looking at the price action of a chart. Understanding the strength of a trend does not have to be complex. Trend strength can be identified simply by using the three different techniques we have covered in this educational post. The best thing we can all do as traders is to be simplistic and not overcomplicate things; this becomes especially easier when you accept that nothing in the market is certain. Each market has its own unique market conditions and will not trade rationally all of the time. Therefore, when a trade does not go your way even though your trend strength signals were high and you followed the market, understand that it is just one trade and that the market is completely neutral. It is neither personally on your side nor personally against you. Trade safely and responsibly. BluetonaFX
Education
by BluetonaFX
37
What Is Swing Trading?Are you looking for a way to take advantage of short-term market movements without the stress of day trading? Look no further than swing trading. In this article, we’ll dive deep into the world of swing trading, exploring how it differs from day trading, discussing its advantages and disadvantages, and taking a look at some of the most popular swing trading tools and indicators. The Basics of Swing Trading Swing trading involves holding a position for a short to medium period of time - usually a couple of days to a few weeks - with the aim of profiting from the “swings” in the market. A swing trader’s definition is simple: swing traders are those who typically enter and exit at significant support and resistance levels, hoping to capture the bulk of an expected move and take profits at potential reversal points in the market. The swings are marked with numbers in the chart below. These traders tend to look at hourly to weekly charts to guide their entries, although the specific timeframe used will depend on the swing trader’s individual style and the asset being traded. It can be used across all asset classes, from stocks and forex to crypto* and commodities. Swing plays in the stock market can be especially effective, as stocks tend to experience plenty of volatility and are subject to frequent news and events that can drive prices to traders’ targets. Swing traders predominantly use technical analysis to determine their entries and exits, but fundamental analysis can also play a significant role compared to shorter-term styles, like day trading. Fundamental analysis, like comparing the interest rates of two economies, can help to set a swing trader’s directional bias over the course of days or weeks. Swing Trading vs Day Trading On the face of it, swing trading and day trading may look similar. After all, both types of traders may look to profit from one key support/resistance level to another. However, there are significant differences between them. The most distinct difference is the holding period. Day traders aim to close all of their positions by the end of the day and tend to exit a trade within a few hours. It’s rare for swing traders to hold a position for less than a day, although it can happen if their target is met during extreme market volatility. Long-term swing trading can involve holding a position for months - something you won’t see any day trader doing. This difference in holding period has important implications for risk management. Day trading can be riskier than swing trading, as day traders are exposed to more volatility and are more susceptible to sudden price movements. Swing traders, on the other hand, have more time to react to changes in the market and ignore intraday noise in favour of focusing on their longer-term target. However, because day traders don’t hold their positions overnight, they also avoid the risk of any adverse events affecting their position while they’re asleep. Swing traders don’t have this luxury. The frequent in-out nature of day trading means active traders can incur more commission fees than swing traders. Spreads are also less of a concern when swing trading, as wide intraday spreads impact a swing trader’s position less than they impact the position of a day trader. Finally, the psychological and time pressures are reduced when swing trading. Day trading can be a highly stressful activity, and it requires near-constant attention to the charts. Swing trading can be a much more relaxed approach, avoiding the stresses of intraday price movements and allowing for much less active management. Swing Trading Advantages and Disadvantages Swing trading has several advantages that make it a popular choice for many traders. That said, it comes with a few disadvantages traders should be aware of. Let’s consider them. Advantages - Lower Time Commitment One of the biggest benefits for swing traders is the reduced time commitment. Many of us have other things going on that mean we can’t commit several hours a day to trading. Swing trading can be adapted to suit a trader’s individual schedule and may only require a few hours each week to be successful. - Flexibility Swing trading is often more flexible than other styles of trading. Not only does it offer time flexibility, but it allows for a wider range of instruments to be traded. For example, you might have trouble performing technical analysis on the 1-minute chart for an illiquid stock, while the 1-hour chart has plenty of price action for you to analyse. In the stock market, swing trading may even be preferred because of the greater number of opportunities it can present. - Potential Higher Returns Than Long-Term Trading Because swing traders usually hold positions for a few days to a few weeks, they have the ability to take advantage of shorter-term market movements that might not be reflected in longer-term price trends. For instance, if a stock experiences a temporary dip in price due to a short-term event, swing traders can take advantage of this dip and make a quick profit when the stock rebounds. Disadvantages - Less Time to React to Market Changes What is a swing trader’s biggest disadvantage? The amount of time they have to react to sudden price movements. Short-term traders that are actively managing their positions may be able to stay out of a position entirely until volatility subsides. In contrast, swing traders may not be available to adjust their position if they’re at work or asleep, leading to potentially significant losses. - Overnight Holding Risks Part of the issue with holding trades overnight is that they can gap up or down - opening much higher or lower than the previous day’s closing price, which could mean a stop loss isn’t triggered. This can result in large losses beyond what the trader was initially willing to risk. - Requires Discipline to Hold Trades Holding a position for several days or weeks can be tough for some traders. Intraday market movements may lead to impulsive decision-making, like closing a trade prematurely or taking a loss because of a perceived change in market direction. To weather these short-term price movements, swing traders must have the discipline to manage their emotions and only check the charts infrequently. Popular Tools to Use When Swing Trading A swing trader’s strategy will ultimately depend on their unique system for entering and exiting trades. There’s no right or wrong way to swing trade; the most important aspect is finding an edge over the market and achieving long-term profitability. Here are three common tools and indicators that can be used as part of a swing trading strategy. Channels Traders can use channels to take advantage of long-term price trends that play out over days and weeks. To plot a channel, you first need to identify a trending asset that’s moving in a relative zig-zag pattern rather than one with large jumps in price. Swing traders will often use the channel to trade in the direction of the trend; in the example above, they might look to buy when the price tests the lower line and take profit when the price touches the upper line of the channel. Moving Averages Moving averages are one of the simplest indicators, but they can help swing traders determine the direction of the trend at-a-glance. The options here are endless: - You could pair fast and slow moving averages (MAs) and wait for the two to cross; this is known as a moving average crossover. When a shorter MA crosses above a longer one, the price is expected to rise. Conversely, when a shorter MA breaks below a longer one, the price is supposed to decline. - You could stick with one and observe whether the price is above or below its average to gauge the trend. When the price is above the MA, it’s an uptrend; when it’s below the MA, it’s a downtrend. - You could use an MA as a support or resistance level, placing a buy order when the price falls to the MA in an uptrend and a sell order when it rises to the MA in a downtrend. In this equity swing trading example, we’ve applied the Exponential Moving Average (EMA) Cross indicator with a 50 and 200-period length in TickTrader. As you can see, it was valuable for identifying the direction of the S&P 500 over the course of several weeks and could have resulted in a profitable swing call. Fibonacci Retracements Lastly, many swing traders look to enter pullbacks in a larger trend. One of the most popular ways to identify optimum entry levels during these pullbacks is with the Fibonacci Retracement tool. Traders typically wait for a shift in price direction, then apply the tool to a swing high and swing low. Then, they enter at a pullback, usually to the 0.5 or 0.618 levels, to profit from the continuation of the trend. As seen above, this strategy can offer ideal entry points for swing traders looking to get in early before a trend continues. The Bottom Line In summary, swing trading can be an ideal style for many would-be traders out there. Rather than spending hours in front of the screen each day, swing traders can take a more laid-back approach. However, while solid risk management skills and iron-clad discipline are necessary characteristics for any trader, they’re even more important for swing traders. Ready to embark on your swing trading journey? You can try a free demo account with us at FXOpen to practise your skills and start building a strategy. Good luck! *At FXOpen UK and FXOpen AU, Cryptocurrency CFDs are only available for trading by those clients categorised as Professional clients under FCA Rules and Professional clients under ASIC Rules, respectively. They are not available for trading by Retail clients. This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Education
by FXOpen
10
📈 Fibonacci Power in Uptrends📍 What Are Fibonacci Retracement Levels? Fibonacci retracement levels—stemming from the Fibonacci sequence—are horizontal lines that indicate where support and resistance are likely to occur. Each level is associated with a percentage. The percentage is how much of a prior move the price has retraced. The Fibonacci retracement levels are 23.6%, 38.2%, 61.8%, and 78.6%. While not officially a Fibonacci ratio, 50% is also used. The indicator is useful because it can be drawn between any two significant price points, such as a high and a low. The indicator will then create the levels between those two points. 📈 To effectively trade Fibonacci retracements during an uptrend and strategically enter the market during pullbacks, follow these steps: 🔷Identify the uptrend: Determine the presence of a clear upward price movement. 🔷Apply Fibonacci tool: Utilize the Fibonacci retracement tool to identify potential retracement levels within the uptrend. 🔷Focus on pullbacks: Wait for the price to experience a pullback or retracement within the uptrend. 🔷Assess Fibonacci levels: Analyze the price's interaction with key Fibonacci levels, such as the 61.8% or 65% zone, to identify potential support or resistance areas. 🔷Higher highs confirmation: Look for the formation of higher highs after the price touches a Fibonacci level, indicating a continuation of the uptrend. 🔷Entry opportunity: Consider entering the market after a pullback when the price resumes its upward movement, using appropriate risk management strategies. By combining the power of Fibonacci retracements, recognizing pullbacks in uptrends, and waiting for higher highs, traders can position themselves to capitalize on the potential profit opportunities offered by the market. 👤 @QuantVue 📅 Daily Ideas about market update, psychology & indicators ❤️ If you appreciate our work, please like, comment and follow ❤️
Education
by QuantVue
2
Introducing the Dual Dynamic Fibonacci Retracement IndicatorHey there, Stock Justice here. Today, I walked you through using the Dual Dynamic Fibonacci Retracement Levels Indicator on TradingView. This powerful tool calculates pivot points and determines Fibonacci retracement levels based on your position in the market. I explored every input, from lookback periods to toggling extra levels, to shifting and extending lines. We also delved into the use of two sets of Fibonacci levels to identify areas of confluence for more robust trading decisions. With vivid colors marking each retracement level and the flexibility to modify the lookback period, this indicator is a game-changer for pinpointing support, resistance, potential reversals, and continuations. Remember, the magic is in the details. Happy trading!
NASDAQ:QQQEducation
by StockJustice
1
From A to D:How to Use the ABCD Pattern to Forecast Market MovesAre you familiar with the ABCD trading pattern? In this article, I will provide a comprehensive explanation of the ABCD trading pattern, including its characteristics, how to identify it, and how to use it in trading. So, sit back, relax, and enjoy the information provided in this article. The ABCD ( AB=CD ) pattern , It's a harmonic pattern that is easily recognizable on a price chart and is composed of four points. This pattern follows a specific sequence of market movements that traders can use to predict potential price swings in the future. The ABCD pattern can be applied in various market conditions, including both bullish and bearish markets, and can be used to speculate on the movement of different forex pairs by simultaneously selling one currency and buying another. However, it's important to keep in mind that the ABCD pattern should not be the sole basis for making trading decisions. It should be used as a tool to inform your decisions. The first step in opening a position using the ABCD pattern is to identify the pattern on a price chart. Multiday charts can provide insight into the behavior of forex markets over an extended period. You can use daily, hourly, or minute-by-minute charts to spot the pattern, but it's crucial to choose a time horizon that aligns with your goals. For instance, traders looking to hold positions for days or weeks may prefer daily charts instead of minute charts. Once you have selected the appropriate chart type, you can search for the ABCD pattern to identify bullish or bearish signals. Let's now take a closer look at how the AB=CD pattern forms and how to spot it: When identifying the ABCD pattern, traders focus on the legs or moves between points. The moves in the direction of the overall trend are denoted as AB and CD, while BC represents the retracement. Once you think you have identified an ABCD pattern on a price chart, the next step is to use Fibonacci ratios to validate it. This process can also help you pinpoint where the pattern may complete and where to consider opening your position. The "classic" ABCD pattern follows a specific sequence of market movements, with the following rules: In a "classic" ABCD pattern, the BC line should ideally be 61.8% or 78.6% of AB. To determine this, traders often use the Fibonacci retracement tool on the initial move from point A to point B. The BC line should end at either the 61.8% or 78.6% Fibonacci retracement level of AB. This helps confirm the validity of the ABCD pattern and gives an idea of where to potentially open a position. Once the BC leg of the pattern is complete, traders would typically look for the CD leg to reach the 127.2% or 161.8% extension of the BC leg. At this point, traders might consider entering a sell position if the pattern is bearish or a buy position if the pattern is bullish. The ABCD pattern extension occurs when the CD leg extends beyond the typical 127.2% and reaches 161.8%. This indicates that the price trend may continue in the same direction for a longer period, providing a potentially profitable trading opportunity for traders who have correctly identified the pattern. It's important to note that this extension is not always reliable and should be used in conjunction with other technical analysis tools to confirm the validity of the trade. Note: In strongly trending markets, the retracement (BC) may not reach the usual 61.8% or 78.6% of AB, but only 38.2% or 50%. It's important to adapt to market conditions and adjust your analysis accordingly. Moreover: During the move from A to B, the market should not exceed either A or B. During the move from B to C, the market should not exceed either B or C. During the move from C to D, the market should not exceed either C or D. For a bullish ABCD, point C must be lower than A, and D must be lower than B. For a bearish ABCD, point C must be higher than A, and D must be higher than B. To identify an ABCD pattern on your TradingView trading chart, follow these six steps: 1 ) Log in to your TradingView trading account and open a market chart. 2 ) Locate the AB line. Remember that this move should be completely contained within points A and B. 3 ) Locate the BC retracement. This should reach either the 61.8% or 78.6% level of the move from A to B. 4 ) Draw the CD line. Using the AB and BC lines, you should be able to predict where point D will fall. CD will generally be equivalent to AB and either 127.8% or 161.8% of BC in both price and time. 5 ) Keep an eye out for price gaps and wide-ranging bars in the CD leg. These can indicate that an extension is forming, implying that CD may be longer than AB. 6 ) Trade the possible retracement at point D. If you've identified a bearish ABCD pattern, consider opening a sell position. On the other hand, if you've found a bullish one, consider buying. And here are a couple of examples: I hope you found this guide on identifying the ABCD pattern useful. Let me know your thoughts in the comments section below, and don't forget to like and follow me if you found this guide helpful.
FX_IDC:XAUUSDEducation
by FOREXN1
44
How to Use Fibonacci RetracementsIf you’re wondering how to trade Fibonacci retracements, you’re in the right place. Today, we’ll be breaking down why traders use Fibonacci retracements and how you can apply them in your own trading, and we’ll list our top tips for making the most out of Fibonacci trading. The Fibonacci Sequence for Trading Fibonacci retracements make use of the Fibonacci sequence and the resulting Golden Ratio. Simply put, the Fibonacci sequence is a mathematical concept that starts at 0, then 1, with each following number being the sum of the previous two. It goes 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, and so on. What we’re interested in is the relationship between the numbers. For example, one number in the sequence divided by the next, like 13/21, will always roughly equal 0.618 (the Golden Ratio). In the case of 13/21, it’s 0.619. As the sequence progresses, the ratio moves closer to 0.618. There are other calculations that we won’t discuss here, but they also give us complimentary ratios of 0.236, 0.382, and 0.786. Notably, traders typically pay the most attention to the 0.382 and 0.618 ratios. 0.5 is also commonly used, despite not being a true Fibonacci ratio. When using Fibonacci patterns while trading, these ratios are typically expressed as percentages, such as 38.2%, 50%, and 61.8%. Applying the Fibonacci Numbers to Trading While these ratios are most often applied to Fibonacci retracements, there are actually quite a few ways to use them. Fibonacci extensions, fans, spirals, channels, and arcs are all advanced techniques commonly used by professional traders. The Fibonacci ratios are also fundamental to harmonic pattern trading. The ABCD , Gartley , and Bat patterns, amongst others, all use Fibonacci retracements and extensions. Once you get the hang of Fibonacci retracements, learning these patterns could be an excellent next step in developing your Fibonacci skills. What Are Fibonacci Retracements? Fibonacci retracements (also termed “fibs”) allow traders to quickly identify key support and resistance levels using the defined ratios. Thankfully, with the advent of charting software like TickTrader , traders no longer need to calculate these key price points manually. Instead, they can apply the visual Fibonacci retracement tool in just a few clicks. Fibonacci retracements typically work best in trending markets. For example, the tool can be applied to significant swing highs and lows to find areas of support during an uptrend. Once the price cools off, it’ll often retrace to the 38.2%, 50%, or 61.8% levels before continuing the bullish trend. Like regular support and resistance levels, you can think of the Fibonacci levels as areas of interest rather than a place where the price will reverse with pip-perfect precision. That’s why candlestick and chart patterns are commonly used in conjunction with Fibonacci retracements. Hammers, shooting stars, triangles, and wedges can all provide you with extra confidence that these levels are likely to hold. How Can Fibonacci Retracements Be Used? Fibonacci retracements help traders to predict the levels the price might respect in the future. Given their predictive nature, they can help you determine optimal entry points, stop losses, and price targets when trading in the forex market . Fibonacci retracements can be used across all timeframes, from 1-second to monthly charts, thanks to the fractal, or self-repeating, nature of the Fibonacci sequence. Using Fibonacci Retracements for Trading Getting to grips with the Fibonacci retracement tool is easy. There are just two key rules to remember: If you’re looking for support levels, set the first point at a significant swing low and the second at a significant swing high. If you’re looking for resistance levels, set the first point at a significant swing high and the second at a significant swing low. Let’s take a look at a few examples. If you’d like to try your hand at using Fibonacci retracements, you can use the TickTrader platform offered by FXOpen . You can gain access to live charts and use the built-in Fibonacci retracement tool to get started in minutes. AUD/USD We can see AUD/USD on the weekly chart following the 2008 financial crisis. After recovering and putting in months of bullish structure, our swing high and low points have formed. Notice that, upon touching the 38.2% area, the price attempted to close below but was rejected three times, giving us three long wicks. This rejection was an opportunity for traders to identify that further bullishness was inbound, which could’ve influenced their lower timeframe decision-making. XBR/USD In this example, Brent Crude Oil has shown signs of bearishness on the 15-minute chart, breaking support and making a lower low. By taking the high and low of this bearish move, we can see that the 61.8% area posed significant resistance, offering two bearish candles that indicated that the price wanted to move lower. Additionally, this area also lines up with a level of support-turned-resistance at 61.8%, giving traders extra confirmation that the area could hold. GBP/USD In the chart above, GBP/USD struggled to maintain any bullishness on the daily chart, continually making lower highs and lower lows. By using the most extreme swing low, we can see that a retracement to the 50% area gave traders a chance to get in shortly before a further breakdown. Interestingly, note that the 23.6% level acted as a support before the swing low had even formed. Subsequently, it also offered traders an opportunity to get in on the retest on that level before the price moved lower. Tips for Using Fibonacci Retracements in Your Trading System Despite their simplicity, there are a few nuances to learn that can help you when trading Fibonacci retracements. They’re Not a Silver Bullet As with any trading tool, using Fib retracements won’t suddenly make every trade you take a winner. It’s merely a predictive tool that can help guide your trades, and it should be used alongside other forms of technical analysis to increase your chances of success. Wait for Closes to Determine Whether an Area is Suitable to Trade To ascertain whether an area is holding or not, traders will typically look at the strength of the reaction from the zone. If the price closes through the level cleanly without producing long wicks, then it’s less likely that it’ll reverse. In contrast, if the price is continually rejected and seems to be struggling, then it’s more likely to reverse. Stick to Your Chosen Timeframe Related to the last point, use the same timeframe on which you set the Fibonacci retracement to determine whether the area is likely to reverse. If you set it on the 1-hour chart, then look at how it closes on the same timeframe. While tempting, if you switch to the 15-minute or 5-minute charts to see how the price is reacting, it’s likely to provide contradictory signals that will only complicate your analysis. Be Aware of Higher Timeframe Trends As with many aspects of trading, it’s always best practice to be cognisant of the higher timeframe trend and trade in harmony with it. For example, if the trend on the daily chart is bullish, looking for bearish retracements to go long on the 4-hour and 1-hour charts will likely yield better results than trying to trade a counter-trend. Your Next Steps for Creating a Fibonacci Retracements Strategy If you’re wondering how to create a Fibonacci trading system, you can: 1. Spend some time experimenting with the Fibonacci retracement tool on historical price charts. 2. Apply Fibonacci retracements to live charts and revisit them to discover how the price reacted at the key levels. 3. Once you feel you have a decent understanding of how to use Fibonacci retracements, you can open an FXOpen account and use a free demo account to test them in live markets. 4. Take notes of what works and what doesn’t, and begin to formulate a trading strategy. 5. Experiment further with indicators you’re familiar with to see if they can provide extra confirmation for your trades. 6. Continually practise and refine your strategy until you’re ready to use it for real. Don’t forget risk management. 7. Learn more about Fibonacci trading and keep refining your strategy until you’re happy with it. This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
FXOPEN:UK100Education
by FXOpen
HOW TO USE FIBONACCI LIKE A PRO #part1Hi there! Bolu here The Fibonacci tool is one of the most popular tools on trading view and many traders use Fibonacci on their charts. FIBS are a major part of my trading system as you can see on this chart, i use it all the time, as I have to know what structure is saying on major and minor structure to aid my analysis and entry/exit confirmations. I will be sharing how I use my FIBONACCI tool in this post and you can take some notes and add to your trading plan if you want. BASICS OF FIBONACCI In mathematics, the Fibonacci sequence is a sequence in which each number is the sum of the two preceding ones. Numbers that are part of the Fibonacci sequence are known as Fibonacci numbers, commonly denoted Fn . The sequence commonly starts from 0 and 1, although some authors start the sequence from 1 and 1 or sometimes (as did Fibonacci) from 1 and 2. Starting from 0 and 1, the first few values in the sequence are: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144. The history of Fibonacci is all over the internet. My Job here is to show you how it can be used to your trading advantage. I majorly use the FIB retracement & FIB extension tool. Trading-view provides a whole lot of other types of FIBs, but they are not a part of my trading system, so i only focus on what is relevant to my Trading plan by keeping it simple. HOW TO USE THE FIBS It is imperative to understand that Fibonacci retracement is a tool used to measure the retrace of a counter trend based on the current trend.​e.g, After a downtrend formation, how far the correction would go would be measured with the FIBs​. while the Fibonacci extension tool is used to measure the 'length' of the continuation of that trend and is mostly used as Take profit levels IT CAN ONLY BE USED IN A TRENDING MARKET.​ You need a valid Uptrend point or Downtrend point to draw out your FIBd] Drawing out FIBs on the chart is a 3step process STEPS TO DRAW FIBS STEP 1 : SPOT A VALID BOS. STEP 2 : IDENTIFY POINT A – POINT B OF THE IMPULSE MOVE . STEP 3: DRAG FIB FROM THE HIGH TO THE LOW / LOW TO THE HIGH ​. I changed the default settings that the FIBS came with on Trading-view and replace the numbers and colors. Each FIB Percentage level means something unique on the charts and that helps with understanding what the trend is doing. The retracement levels are used to see how strong the pullback phase is. Understanding the strength of the pullback is one of the most important things to know in the trend . I will probably make another post on 'Trend strength Analysis'..., You can put it in the comments if you would like to study it with me. Now, back to our FIBs. Every FIB level is uniquely important and useful. The FIB Level that aligns with a key level of structure is ​High Probability. In the Part 2 of this post, i would share the 'secret sauce' of the FIB retracement levels and how they can be used in both Major and Minor Structure.
Education
by knowledgeforskills
Fibonacci Levels and How They Can Be Used in TradingGreetings, @TradingView community! This is @Vestinda, bringing you a helpful article on the topic of Fibonacci Retracements and how to effectively utilize them in your trading strategies. Fibonacci retracement levels are helpful for traders and investors in financial markets. They're horizontal lines on price charts that can show where price may reverse direction. These levels are based on the Fibonacci sequence, which is a series of numbers that occur in math and finance. Use case: The first thing to understand about the Fibonacci tool is that it is most effective when the market is trending. In an upward trending market, traders commonly use the Fibonacci retracement tool to identify potential buying opportunities on retracements to key support levels. Conversely, in a downward trending market, traders may look for opportunities to short sell when the price retraces to a Fibonacci resistance level. Fibonacci retracement levels are regarded as a predictive technical indicator because they attempt to forecast where the price will be in the future. Based on the theory, when trend direction is established, the price tends to partially return or retrace to a previous price level before continuing to move in the direction of the trend. How to Find Fibonacci Retracement Levels: Fibonacci retracement levels can be found by identifying the key Swing High and Swing Low points of an asset's price movement. Once these points are established, you can use the Fibonacci retracement tool, which calculates the potential levels of support and resistance based on the ratios between the key points. To apply the Fibonacci retracement tool, click and drag from the Swing Low to the Swing High in a downtrend, or from the Swing High to the Swing Low in an uptrend. This generates a set of horizontal lines at predetermined Fibonacci ratios, including 23.6%, 38.2%, 50%, 61.8%, and 78.6%. Are you keeping up with me? ;) Now, let's explore some examples of how Fibonacci retracement levels can be applied in cryptocurrency trading The Uptrend: In this instance, the Fibonacci retracement levels were plotted by selecting the Swing Low and Swing High points, which were observed on January 8th, 2021 at a price of $41,904. The Fibonacci retracement levels were $33,521 (23.6%), $29,197 (38.2%), $26,114 (50.0%*), $23,356 (61.8%), and $19,925 (76.4%), as shown in the chart. Traders anticipating that if BTC/USD retraces from its recent high and it will likely find support at a Fibonacci retracement level. This is due to the tendency of traders to place buy orders at these levels as the price drops, creating a potential influx of buying pressure that can drive up prices. While the 50.0% ratio is not officially recognized as a Fibonacci ratio, it has nonetheless become widely used and has persisted over time. Now, let’s look at what happened after the Swing High occurred. Price bounced through the 23.6% level and continued to fall over the next few weeks. Two times tested 38.2% but was unable to fall below it. Subsequently, around January 28th, 2021, the market continued its upward trend and surpassed the previous swing high. Entering a long position at the 38.2% Fibonacci level would have likely resulted in a profitable trade over the long run. The Downtrend Next, we will explore the application of the Fibonacci retracement tool in a downtrend scenario. Here is a 4-hour chart depicting the price action of ETH/USD. As you can see, we found our Swing High at $289 on 14 February 2020 and our Swing Low at $209 later on 27 February 2020 The retracement levels are $225 (23.6%), $236 (38.2%), $245 (50.0%), $255 (61.8%) and $269 (76.4%). In a downtrend, a retracement from a low could face resistance at a Fibonacci level due to selling pressure from traders who want to sell at better prices. Technical traders often use Fibonacci levels to identify areas of potential price resistance and adjust their trading strategies accordingly. Let’s take a look at what happened next. The market did make an attempt to rise, but it briefly halted below the 38.2% level before reaching the 50.0% barrier. The placement of orders at the 38.2% or 50.0% levels would have resulted in a profitable trade outcome. In these two instances, we can observe that price positioned itself at a Fibonacci retracement level to find some temporary support or resistance. These levels develop into self-fulfilling support and resistance levels as a result of all the people who utilize the Fibonacci tool. All those pending orders could affect the market price if enough market participants anticipate a retracement to take place close to a Fibonacci retracement level and are prepared to enter a position when the price hits that level. In conclusion: It's important to note that pricing doesn't always follow an upward trajectory from Fibonacci retracement levels. Instead, these levels should be approached as potential areas for further research and analysis. If trading were as simple as placing orders at Fibonacci retracement levels, markets wouldn't be so volatile. However, as we all know, trading is a complex and dynamic process that requires a combination of knowledge, skill, and experience to succeed. We are truly grateful for your attention and time in reading this post. If you found it insightful and beneficial, we would be thrilled if you could show your support by clicking the <> button and subscribing to our page. We are excited to share that our upcoming post will showcase what occurs when Fibonacci retracement levels do not perform as expected. Stay tuned for an informative and professional read.
INDEX:BTCUSDEducation
by Vestinda
22
Fibonacci Trick for measuring Risk to Reward RatioIf you don't use your fibb tool much, (save your settings as a template first if you do) or for just a quick check to see if there is enough reward for the risk in the trade, you can set up your Fibonacci in increments of 1 (2.5 is 1:1.5) Do this as far as you like. You can extend lines left or right to check if the R Ratio you are looking for will fit this market structure, or if you should wait for a better set up. I happen to see this in a YouTube video, and thought it was very interesting and more than useful... The settings are as follows : 0 - loss/stop loss price 1 - 1 unit of risk (100 percent) 2 - 1 unit of risk plus 1 unit of reward (1:1) 2.5 - 1 unit of risk, 1.5 unit reward (1:1.5) 3 - 1 unit of risk, 2 unit reward (1:2) ..... and so on. Then just save it as a template for quick set up later -- Example of use 6 (600 percent) is 1:5. Just subtract 1 for the risk and the remaining is the reward ratio. Each 100 percent mark is a single unit of risk (-1) In MT4 its much better to see it directly, as you can label the levels how you wish (using the same formula)
Education
by ForexStoryteller
1
Navigating the Uncertainties of Fibonacci Retracements in CryptoHello, @TradingView community! I'm @Vestinda, and I'm thrilled to share an informative article with you today about Fibonacci Retracements. While they can be useful tools for traders and investors in financial markets, it's important to note that they are not infallible and may not always produce the desired outcomes. As discussed in our previous post, Fibonacci support and resistance levels are not infallible and may occasionally break. It is essential to remain vigilant and use these levels in conjunction with other technical indicators and market analysis to make informed trading decisions. While Fibonacci retracements can be a useful tool in technical analysis, it is crucial to exercise caution and not solely rely on them as the sole basis for trading decisions. Unfortunately, Fibonacci retracements are not infallible and may not always work as expected. Let us examine a scenario where the Fibonacci retracement tool proves to be ineffective in technical analysis. To make a prudent trading decision amidst the ongoing downtrend of the pair, you make a strategic choice to leverage the Fibonacci retracement tool. With meticulous attention to detail, you designate the swing low at 3,882 and the swing high at 10,482 for precise determination of a Fibonacci retracement entry point. The BTC/USD Daily chart is shown below. Upon careful analysis, it is evident that the pair has rebounded from the 50.0% Fibonacci retracement level for multiple candles. As an astute trader, you recognize this crucial pattern and conclude that it is a viable opportunity to enter a short position. You thoughtfully consider, "This particular Fibonacci retracement level is showing remarkable resilience. It is undoubtedly a lucrative moment to short it." You may have been tempted to take a short position in anticipation of profiting from the downtrend of the pair, while simultaneously daydreaming of cruising down Rodeo Drive in a Maserati. However, if you had placed an order at that level without proper risk management, your hopes of profit would have quickly dissipated as your account balance plummeted. Observing the price action of BTC, let's examine what occurred next. Indeed, the price action of BTC demonstrates that the market is constantly evolving, and traders must be prepared to adapt to these changes. As shown in this specific case, the price not only climbed close to the Swing High level, but the Swing Low marked the bottom of the previous downtrend. This serves as a prime example of the significance of flexibility in the dynamic realm of cryptocurrency trading. What can we learn from this? In the world of cryptocurrency trading, Fibonacci retracement levels can be a useful tool to increase your chances of success. However, it's important to understand that they are not foolproof and may not always work as intended. It's possible that the price may reach levels of 50.0% or 61.8% before reversing, or that the market may surge past all Fibonacci levels. Additionally, the choice of Swing Low and Swing High to use can also be a source of confusion for traders, as everyone has their own biases, chart preferences, and timeframes. In uncertain market conditions, there is no one correct course of action, and utilizing the Fibonacci retracement tool can sometimes feel like a guessing game. To improve your chances of success, it's crucial to develop your skills and use Fibonacci retracements in conjunction with other tools in your trading toolkit. Thank you for taking the time to read our post. We sincerely appreciate your attention and hope that you found it informative and helpful. If you did, we kindly request that you show your support by clicking the "Boost" button and subscribing to our page. Your support helps us create more valuable content for our community.
INDEX:BTCUSDEducation
by Vestinda
How to use Fibonacci Retracements for Trading and InvestingIntroduction The Fibonacci sequence is a series of numbers that starts with 0 and 1, and each subsequent number is the sum of the two preceding numbers. The sequence goes like this: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, and so on. The sequence is named after Leonardo of Pisa, an Italian mathematician from the Middle Ages who was also known as Fibonacci. He introduced the sequence to the Western world in his book Liber Abaci, which he wrote in 1202. However, the sequence had already been discovered by Indian mathematicians several centuries earlier. It was used in ancient Indian mathematics to solve problems related to the breeding of rabbits, which is why the sequence is sometimes called the "rabbit sequence". The Fibonacci sequence has since become a widely studied and applied concept in mathematics, science, and finance. It is used to model a wide range of natural phenomena, including the growth patterns of plants, the breeding habits of animals, and the structure of galaxies. In trading and investing, Fibonacci retracements are used to identify potential levels of support and resistance in a market or investment. These levels are based on the percentage of a previous price movement that has been retraced. For example, if a stock price has risen from $50 to $100, and then retraces 50% of that move, the 50% retracement level is considered a potential level of support. Understanding Fibonacci retracements To create Fibonacci retracement levels, traders use the high and low points of a previous price movement. For example, if a stock has recently traded from $50 to $100, the high point is $100 and the low point is $50. Traders then draw horizontal lines at various levels between the high and low points, based on the Fibonacci sequence. The most common retracement levels are 38.2%, 50%, and 61.8%, although some traders also use 23.6% and 78.6%. Calculating Fibonacci retracements is relatively simple. To calculate the 38.2% retracement level, for example, you take the difference between the high and low points and multiply it by 0.382. You then subtract this number from the high point to get the retracement level. For the 50% retracement level, you multiply the difference by 0.5, and for the 61.8% retracement level, you multiply by 0.618. Using Fibonacci retracements for trading Fibonacci retracements can be used to identify potential levels of support and resistance in a market. For example, if a stock price is in an uptrend and begins to pull back, traders may look for potential support levels based on Fibonacci retracements. If the price retraces to the 38.2% level, for example, this may be seen as a potential level of support. If the price continues to fall and reaches the 50% or 61.8% level, these levels may also be seen as potential support levels. Similarly, in a downtrend, traders may use Fibonacci retracements to identify potential resistance levels. If the price is in a downtrend and begins to rally, the 38.2%, 50%, and 61.8% retracement levels may be seen as potential levels of resistance. Fibonacci retracements can also be used in range-bound markets. If a stock price is moving sideways between a support and resistance level, traders may use Fibonacci retracements to identify potential levels within the range where the price may bounce. Another way to use Fibonacci retracements for trading is in range-bound markets. In this type of market, prices may move up and down within a specific range, with no clear trend. In these cases, Fibonacci retracements can be used to identify potential areas of support and resistance within the range. Traders can use Fibonacci retracements to identify buy and sell signals at these levels. It's important to note that Fibonacci retracements should not be used in isolation, as they can produce false signals. To confirm signals generated by Fibonacci retracements, traders often use other technical indicators, such as moving averages, momentum oscillators, or volume indicators. For example, if a trader sees a retracement to a Fibonacci level and the price is also above the 50-day moving average, this could confirm a bullish signal and increase the likelihood of a successful trade. Using Fibonacci retracements for longer-term investments In addition to trading, Fibonacci retracements can also be used for investing. Long-term investors can use Fibonacci retracements to identify potential entry and exit points for their investments. For example, if a stock has experienced a significant upward trend, and then pulls back to a Fibonacci level, this could indicate a potential buying opportunity. Conversely, if a stock has reached a resistance level at a Fibonacci retracement level, this could be a signal to sell. Conclusion ibonacci retracements are a popular technical analysis tool used by traders and investors to identify potential support and resistance levels. By understanding the Fibonacci sequence and how to calculate and plot retracement levels on a chart, traders and investors can use these levels to make more informed trading and investment decisions. However, it's important to remember that Fibonacci retracements should not be used in isolation and should be used in conjunction with other technical indicators and fundamental analysis. With a thorough understanding of how to use Fibonacci retracements, traders and investors can incorporate this tool into their overall strategy to increase the likelihood of successful trades and investments.
BITSTAMP:BTCUSDEducation
by JS_TechTrading
HOW TO TRADE FIBONACCI RETRACEMENTS: THE SHORT GUIDEHey there, traders. One of the common tools we use for technical analysis are Fib retracements and a lot of you been asking on how to use them properly. Well, today is your lucky day :) Fibonacci Retracement is a technical analysis tool that is widely used by traders to identify potential levels of support and resistance in financial markets, including forex markets. The tool is based on the mathematical sequence known as the Fibonacci sequence, which is a series of numbers in which each number is the sum of the two preceding ones. The Fibonacci Retracement levels of 0.5 and 0.618 are two of the most important levels used in this tool. In this article, we will discuss how to use these levels for trading forex markets. Understanding Fibonacci Retracement Levels Before we dive into the specifics of using the 0.5 and 0.618 levels, let's briefly review the concept of Fibonacci Retracement. The tool is based on the idea that markets tend to retrace a predictable portion of a move, after which they may continue in the same direction or reverse. The retracement levels are calculated using the Fibonacci sequence, and they represent potential levels of support or resistance. The key levels are 0.236, 0.382, 0.5, 0.618, and 0.786. Using 0.5 and 0.618 Levels for Trading Forex Markets The 0.5 and 0.618 levels are particularly important because they are close to the midpoint of a move, and they are based on the golden ratio, which is a key number in mathematics and nature. The 0.5 level represents a 50% retracement of a move, while the 0.618 level represents a 61.8% retracement. To use these levels for trading forex markets, you can follow these steps: Step 1: Identify a Trend The first step is to identify a trend in the market. You can do this by analyzing the price action on a chart and looking for a series of higher highs and higher lows in an uptrend, or lower highs and lower lows in a downtrend. Step 2: Draw Fibonacci Retracement Levels Once you have identified a trend, you can draw the Fibonacci Retracement levels using a tool provided by your trading platform. You will need to identify the high and low points of the trend, and then draw the retracement levels from the high to the low in an uptrend, or from the low to the high in a downtrend. Step 3: Watch for Reversals at 0.5 and 0.618 Levels The 0.5 and 0.618 levels are potential levels of support or resistance, and they can act as turning points in a trend. If the price retraces to one of these levels, you should watch for signs of a reversal, such as a bullish or bearish candlestick pattern, or a divergence in an oscillator indicator or any other personal confirmation for potential entry. Step 4: Confirm with Other Indicators To increase the probability of a successful trade, you should confirm the potential reversal with other technical indicators, such as a moving average, a trendline, or a momentum indicator, check with the fundamentals and most importantly confirm that it aligns with your original bias regarding the pair. This will help you to avoid false signals and improve your trading accuracy. Step 5: Enter the Trade and Set Stop Loss and Take Profit Levels Since the entry was at the "Golden zone", the exit would be around the 0% Fib level. Yes, you just missed half of the trend, but it's a consistent tool that can help you get that edge over the market that you need. We hope you found this useful and please let us know on what you would want us to cover next!
BITSTAMP:BTCUSDEducation
by Investroy
13
📊 Fibonacci Trading: Extension LevelsThe Fibonacci retracement tool plots percentage retracement lines based upon the mathematical relationship within the Fibonacci sequence. These retracement levels provide support and resistance levels that can be used to target price objectives. Fibonacci Retracements are displayed by first drawing a trend line between two extreme points. A series of six horizontal lines are drawn intersecting the trend line at the Fibonacci levels of 0.0%, 23.6%, 38.2%, 50%, 61.8%, and 100%. 📍 How this indicator works The percentage retracements identify possible support or resistance areas, 23.6%, 38.2%, 50%, 61.8%, 100%. Applying these percentages to the difference between the high and low price for the period selected creates a set of price objectives. Depending on the direction of the market, up or down, prices will often retrace a significant portion of the previous trend before resuming the move in the original direction. These countertrend moves tend to fall into certain parameters, which are often the Fibonacci Retracement levels. 📍 Calculation Fibonacci numbers are a sequence of numbers in which each successive number is the sum of the two previous numbers: 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, and so on. 📍 What Are Fibonacci Extensions? Fibonacci extensions are a tool that traders can use to establish profit targets or estimate how far a price may travel after a pullback is finished. Extension levels are also possible areas where the price may reverse. Drawn as connections to points on a chart, these levels are based on Fibonacci ratios (as percentages). Common Fibonacci extension levels are 61.8%, 100%, 161.8%, 200%, and 261.8%. 🔹 Because Fibonacci ratios are common in everyday life, some traders believe these common ratios may also have significance in the financial markets. 🔹 Fibonacci extensions don't have a formula. Rather, they are drawn at three points on a chart, marking price levels of possible importance. 🔹 The Fibonacci extensions show how far the next price wave could move following a pullback. 🔹 Based on Fibonacci ratios, common Fibonacci extension levels are 61.8%, 100%, 161.8%, 200%, and 261.8%. 🔹 Extension levels signal possible areas of importance, but should not be relied on exclusively. 👤 @AlgoBuddy 📅 Daily Ideas about market update, psychology & indicators ❤️ If you appreciate our work, please like, comment and follow ❤️
Education
by QuantVue
4