NYSE Comp: Broadening Top Potential Macro WarningThe NYSE composite has spent the last year building a classic broadening top pattern. The pattern develops as strong hands distribute to weak hands, and when it occurs, often marks a transition from bull to bear.
1. Broadening formations are relatively rare and because the pattern itself is difficult to trade systematically (as the boundaries are continually moving farther apart) aren't given a lot of attention in literature.
a. Edwards and Magee in their seminal "Technical Analysis of Stock Trends" suggest that the broadening top, as a rule, only appears near the end or in the final phases of long bull markets.
b. Shabacker in his classic "Technical Analysis and Stock Market Profits" also remarks that the pattern is rare, but extremely important, often marking an important transition from bull to bear.
2. In my experience both Shabacker and Edwards and Magee are correct. They are rare and generally very hard to trade (so I don't bother) but they do offer an important warning of a potential phase transition.
3. Note that the pattern isn't always well defined, with overthrows and underthrows of the pattern boundaries occuring regularly. This is what makes it hard to trade or design a trading strategy around.
a. The pattern is extremely compelling when it appears in individual equity charts.
As I see it, these are the important chart elements.
1. The composite broke the trendline from the March 2020 low. This changed the weekly trend from up to neutral.
2. After breaking the trendline, the Comp spent most of the next year moving laterally and tracing out a clear broadening formation, warning of a potential phase transition.
3. Over the last few weeks the Comp violated the rising trend line (marked on the chart) along the last three internal trend line lows, and accelerated to the lower boundary of the pattern.
4. I have included the 10 and 40 week moving averages. The two averages are roughly equivalent to the 50 and 200 day averages. Note that the 10 has rolled over and is moving to meet the flattened out 50. Often a narrowing between two moving averages marks an important market decision point. Its interesting that it is occuring at the very moment when the broadening formation appears to be nearing a conclusion.
5. If the market does begin to breakdown there are several initial move targets that can be constructed. I like to look for confluences of move targets and chart supports. The more the merrier.
a. I like to overlay the .382, .500 and .618% retracement targets first.
b. Next I locate chart supports. In this case, the area around the 14183 high from early 2020 can be expected to generate at least some buying interest.
c. There is also a measured move target that can be generated using the width of the broadening top, it projects to roughly 14400.
d. 14089 is the .382% Fibonacci retracement.
6. The support confluence provided by the pivot, the Fibo and the measured move suggest an initial support zone between 14089 and 14400. I would clearly watch this roughly 2% wide zone for reversal behaviors to either reduce shorts or perhaps, if the right behaviors develop, consider new longs.
But again, the MAIN point is not so much generating trading targets as recognizing the pattern as potentially a harbinger of an important trend change. This is particularly important against the context presented in the macro overview posts of the last few weeks.
Good Trading:
Stewart Taylor, CMT
Chartered Market Technician
Shared content and posted charts are intended to be used for informational and educational purposes only. The CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. The CMT Association does not accept liability for any financial loss or damage our audience may incur.
Fibonacci Retracement
Get major S&P trading levels through Pitchfan!Hey everyone, how are you all?
Let’s discuss Pitchfan and Fibonacci Channel on S&P 500. There are some bearish news in the market. The news includes Federal Reserve’s stance on increasing the interest rates, making investors shifting into the bond markets. Netflix down by 22%. Your trades should always respect the fundamental analysis. Don’t try to go against it.
Market Condition:
S&P Index has been in a massive uptrend, giving around 120% returns from its previous low on 20 March 2020. It has been in uptrend since March 2020, having few corrections. But, with Pitchfan, we can catch all these corrections with high accuracy.
Pitchfan
Pitchfan is a mixture of Fibonacci Fan and Pitchfork. It uses both of their levels and has some features of Gann Fan too. The red coloured line is the median line which is the main support and resistance line. The other lines have importance according to Fibonacci’s rules. Main lines are 0.382, 0.5, 0.618. We have kept 0.25 because it is the median of the red line and the 0.5 level of Fibonacci. You can use my levels through the picture in the chart.
How to draw a pitchfan?
Pitchfan is drawn at the starting of a trend. Here, the market was consolidating before entering into the uptrend. A is the the first low of the trend, B is the next high and C is the next low. It can be drawn on the higher timeframes. Refer to the image below.
How to trade these levels?
These lines are the major points where the trend reverses on the lower timeframes. We can use these levels to trade. You need to check two things to get the direction of the trade:
The current trend matches on both the higher timeframes and the lower timeframes.
The news is in the same direction as your trade.
After this, you have to get the best entry. For this, you need to get these three confirmations:
Candlestick Pattern
Fibonacci Retracement or any Chart Pattern
RSI or any other Oscillator
Check out the below chart image to get the perfect entry:
Observations:
Price will touch these lines in 70% of the cases. Price might not touch these lines in 30% of the cases due to sentiments or any other driving factor.
When price passes by any major level, it will always take a pullback on the lower timeframes. You may trail your stop loss or enter into the trade by checking out the pullback.
Targets?
Target can be the next line coming in the direction of the trade. Always have RR of 3 or more. You can always trail the stop loss after checking out for the pullback on the lower timeframes.
Always check the news before carrying your positions overnight.
S&P might bounce back from the yellow level, from the blue demand zone. If it breaks it, our target will be the red median line.
Fibonacci Channel:
Fibonacci channels gives the major turning levels too. Here, you can see the price is bouncing back from the 0.5 to 0.618 levels, and it has happened multiple times. You can take confirmations on the lower timeframes and take the trades accordingly. Do let me know if you want to learn how to make it.
Bearish Entry ExampleThis kind of price action happens all the time, you just have to spot it while it's happening so that you can plan your trade and execute. I have put this together to give you an idea of the type of things I look for in the hope that it can help you too.
Once price action has made a clear impulse to the upsides and taking out previous structure that's our first sign that the buyers are stepping in. Once we see some corrective price action we can place our fib from the high to low, mark out previous structure and identify the pattern that price is making to build a picture of where price is most likely to reverse giving us the best possible entry.
HAPPY 2022 ⚪️ 2021's RecapHello guys, Wish you're all doing fine.
Happy New Year.
Sorry I wasn't around these past few days. I was on a break during the holidays.
I decided to recap the Educational Ideas we posted in 2021.
Let's gather them all in one post and take a quick look:
First things first, Fibonacci, an excellent tool for analyzing the market:
Bollinger Bands, And how they help us with our forecasts:
RSI, Another great indicator to identify Oversold and Overbought conditions:
Parabolic SAR, to determine the break-even point or entry or exit points:
Now, this final post is where most of the great analyzers on TradingView have come together to share their educational ideas. Take a look:
How did you spend 2021? Was it a profitable year for you? Did you learn anything new? Any big losses? Please share it with us.
Weber's Law and Fibonacci Numbers: An Exploratory EssayI use Fibonacci numbers rather frequently. In fact, the Fib retracement tool is the first thing I reach for when I start on a new chart. However, explanations for how Fibonacci numbers work have always sound woolly and mystical to me. They work because "man is subject to rhythmical procedure", because there is a Golden Ratio that is hidden behind all things, because Cthulhu says so?
However, when we take a close hard look at reality, and actually whip out a ruler and measure things, we find that the Fibonacci sequence is *not* found as-is throughout reality. What we do find are *approximations*. However, this is to be expected for approximations of subjects where the rate of growth is proportional to the current size. And this is to be expected because of Weber's Law.
Weber’s law is a psychological law quantifying the perception of change in a given stimulus. The law states that the change in a stimulus that will be just noticeable is a constant ratio of the original stimulus. It has been shown not to hold for extremes of stimulation. And since I will be referencing Mike Cohn's excellent essay (1), I might as well quote his explanation of how Weber's Law apply to Fibonacci numbers:
"Imagine instead being handed a 20kg weight and a 21kg weight. They are the same one kg difference as the one and two kg weights. But you would have a much harder time identifying the heavier of the two weights. The difference from one to two kilograms is 100%. You can probably distinguish the weight of items that differ by 100%. The difference between 20 and 21kg, however, is only 5%. You probably can’t tell the difference. (I know I can’t.) And if you could, it would mean you should be able to distinguish between a 1.00 kg weight and a 1.05 kg weight, as that would also be 5%. The values in the Fibonacci sequence work well because they roughly correspond to Weber’s Law. After the two (which is 100% bigger than one), each number is about 60% larger than the preceding value. According to Weber’s Law, if we can distinguish a 60% difference in effort between two estimates, we can distinguish that same percentage difference between other estimates. So, the Fibonacci values work well because they increase by about the same proportion each time."
So, given that how we think is affected by how we perceive (2), if Weber's Law applies, the Fibonacci retracement tool works for some of us because it allows us to focus our *imagination by visualising discernible and distinct possibilities within a limited range*. This is why the common criticisms of TA, including Fibs, are valid: 1) it is an uncertain business; 2) one cannot consistently identify where levels should be placed and forecasts are prone to revision; 3) its narrative story-telling power may be stronger than its forecasting power; and 4) levels cannot be verified till they have been tested (ie passed). Let's be humble and accept the general validity of these criticisms; for if TA can be an exact science, let he produce an algorithm which could make anyone rich!
That being said, if Weber's Law apply thusly, it simply reaffirms what experience traders often exhort: that it is hard for algorithms to replace (3) the imagination and instincts of an experienced trader!
Having said that, if Weber's Law apply thusly, we ought to 1) pay attention to how other industries, eg Mike Cohn's, have adapted Fibonacci numbers to great success and ask ourselves if our approach to Fibs can be adapted accordingly; and 2) maybe more importantly, reconsider our values, assumptions, beliefs and expectations of those tools we use that are based on Fibs.
(1) www.mountaingoatsoftware.com
(2) www.frontiersin.org
(3) "Replace", not "aid".
FIBONACCI RETRACEMENT & EXTENSION | Trading Basics 📚
Hey traders,
In this video, I will teach you the basics of fib. extension & retracement.
In this lesson we will cover:
Settings for fib.retracement
Settings for fib. extension
Impulse leg & correct drawing
Application in a trending market
Let me know in a comment section if you want to see more lessons like that.
❤️Please, support this video with like and comment!❤️
🧐🧐SEE THIS BEFORE SELLING BITCOIN🤯🤯Hi Trading view Family, Theres lot of noise on social media regarding selling bitcoin, But we should see this scenario before selling bitcoin.On dailt TF we can see a trendline with fib retracement, And till now it is retraceing 0.382 level with 20 EMA support. Along that we also can have testing of 0.5,0.618 level on fibonacci retracement. And high chance is that it can take support from one of these 3 levels and continues its uptrend. So take actions carefully
Date of Analysis:-16 November 2021
Anatomy of a Day Trade: Entrances and ExitsO FGS! Dammit! They gapped it up overnight, what should I do?!?
Well what gap is this? Three weeks ago we had Initiation Gap: These often do not fill, don't short them! It's suicide, lol!
This has hallmarks of an Exhaustion Gap; it will fill intra-day or within a few sessions at most... a great short opportunity!
See my related post on gaps FYI.
But, when should you enter?! If you foolishly short it at the open be prepared to wait for hours and watch your position dwindle... ow!!
Should you buy calls at the open?! Maybe it will run higher?! Of course it CAN, but it can also run lower and gapfill quickly, within minutes.
A long position taken first thing is high risk... as are early shorts! So, when can you enter a position with reasonable expectation of profit?!
In fact, ANY position taken in the first 20 minutes of the trading day is very high risk, I do not like to open new positions right away!
So, you Watch and Wait! Looking for opportunity... in the first hour price ran higher and calls had been profitable, but we didn't take a position with no signal, we like good Risk/Reward positions with clear signals, not gambling on the opening price. After what seems like an eternity, price begins to consolidate and gives us several warning signals, first a pinbar appears, with a needle doji and tall wick followed by a red candle, a bearish signal; two spinning tops follow, but price clings to the opening price support line tenaciously as the bulls struggle to push higher... finally the price breaks below the support from the opening gap. This was the price support that market enjoyed from the open, as buy order imbalance filled, RSI weakens and money flow decreases until... price breaks under the opening price, signaling downtrend moving towards the gap. Notice how RSI moves from overbought, signaling weakness?
This is a short entry high R/R position. You can buy daily puts here with confidence they will increase in value rapidly and immediately.
You do not want to get stuck holding these dreadful instruments more than half an hour, you can see the value drain out as expiration nears!
Well we see the gap filled, not completely to yesterday's closing price, but it sold down to former resistance at the high prices from last session.
This often is all you get on a fill, it won't always close precisely! Sometimes price will dip below the gap and go negative for a few minutes. When the gap fills, you close position, we can't afford to gamble on whether it's gonna get lower or not...
Suddenly an impulsive bright green candle appears! Gosh I hope you sold those puts!
Notice how RSI has moved nearly to oversold? It's gonna bounce!!
NOW is the time we make the best money. This was the candle we saw on 7 October, pullback ran to 13 October; another one appeared on Fed day at 2PM, pullback was just minutes then it bulled up and up... these are the money makers! Learn to recognize this chart pattern and you WILL make money on option trades.
You can take a moderate sized position here, I like to trade lots of ten, when I see this candle I'm gonna start with 20-40 calls depending on cost, and add more as price moves in favor. I do not like to add when price moves away! USUALLY Dollar-Cost Averaging in options just leads to magnified losses!! The more you take the greater the loss you might experience, remember when you enter an option trade you assume the total risk for premium paid, a sudden price change can wipe out your position before you can even set up the closing trade. So risk what you are willing to lose, and no more.
After the first impulsive move, a retracement nearly always pulls price back to ~2/3 of the impulse height. Here you draw the fib extension to get your target price projection; Fib Extension tool has three buttons, first at bottom of green candle, second at top, and third at bottom of the retracement. Chart your fibo and target the 1.618 extension, this is where your calls will take you! They might take you farther, but that involves more hand-wringing, nail-biting and screen cursing while you wait and watch the time value run down! Do not hold these any longer than necessary!
So there were TWO good R/R day trades in Friday's session on 11/5. A short, and the subsequent long. You could have taken other positions, but R/R would be poor, most 'trades' without signals are just gambling. Be a trader not a gambler! Most of the time you want to stay OUT of the market!
Look, today's trades involved about two half-hours out of a 6.5 hour session! The rest was just noise and risk.
Notably, in 'Power Hour' at EOD, there was not enough bullish energy to lift price back to HOTD... this is Bearish, in a long bull run Fridays typically close at HOTD and short-covering rallies into close are typical, we didn't get that today and daily calls ran down to expiration worthlessly. You might consider taking a longer-term short in weekly or monthly contracts, to catch a move MOnday if the price weakness persists and a gap down follows the exhaustion gap up... if you dare.
Remember Buffet's rules of trading: 1) Never Lose Money. 2) Never break Rule 1.
Hopefully this post will be of some value of increasing clarity in trading. When you're in the market watching the numbers flicker it is so easy to get lost and miss the forest for the trees... Get ready for some amazing trades as this parabola rolls over and the cascade ensues... always exciting!!
Master's way to use Fibonacci ToolHello traders and dear followers!
I have not posted any idea since the start of this month but today I am back with a powerful strategy that will help your trading easy and the strategy is also very easy to apply. It works exactly as you have ever imagined/wished that God should give you.
1. A strategy that can predict the Target perfectly.
2. At the same time strategy should predict the next drop.
3. Plus strategy should also guide you through every up and down before reaching your target. LOL
We will only use the Fibonacci retracement tool and you can select Fibonacci tool from the Tool column on your left and it's inside the third option. To make it your favorite toll hit the star button.
In this strategy, you just have to find a chain of bullish candles. A chain should be of at least 3 or more continuous bullish candles and after that look for the first bearish candle and that's the first step.
Now look at the chart it's W1 btcusdt candlestick chart. If we see from 14-dec-2020 there is a set of 4 continuous bullish candles. Start the Fibonacci toll from the bottom of the bullish candle and put '0.618' Fibonacci level at the point where the first bearish candle is closed. Now Fibonacci '0' level is your target.
We can see BTC hit the Target and then drop. It's simple as that.
Let's move to the second example
The second example is the ethusdt D1 chart. In this chart, there are 2 examples. The first one has 4 continuous bullish candles and the second one has a set of 5 continuous bullish candles.
I started the Fibonacci Retracement tool from the start of bullish candles then set my Fibonacci '0.618' level at the point where the first bearish candle is closed and '0' is the Target.
We can see ETH has already achieved both targets.
In the first case of ETH it dropped after completing the target and the current one is still live means it is ready to drop soon.
You can use this tool in any timeframe.
At the beginning I gave 3 points and above you saw it complete target which was my first point and all dropped well after completing the target which was my second point and for the third point set these Fibonacci pairs the same way in any pair in 4hr or above timeframe than after that change the timeframe to 15/30/1hr timeframe and you will be amze to see how perfectly Fibonacci levels are respected.
If you want more just hit the like button and follow to stay connected.
How To Find The Best Trend Line Break and RetestWait For Price To Break Trend Line. Wait For Price To Close Below Trend Line.
Watch For A Price Action Signal To Form On The Retest. Watch For A Rejection Candlestick or a Pin Bar. In the example below, the candlestick wick protrudes through EMA 10, EMA 20, Trend Line, and 50% Fibonacci Retracement Level.
Enter at the close price of rejection candlestick. Close Price is 188.13 in this example.
Note: The best trend lines has 4 or more touches.
How To Trade Support Resistance Levels with Price Action Signal Wait for a Price Action Signal to form at the following support resistance levels.
EMA 10 Level
EMA 20 Level
Fibonacci Level
Horizontal Level
Set Target at the next support resistance level. Set Stop Loss Below EMA 20 Price and Low Price of Price Action Signal Candlestick. Enter at close price of Price Action Candlestick.
Engulfing Candlestick at Support Resistance Levels
How to use Fibonacci to determine a trend change or a correctionFibonacci is a great tool that I have learned to use in different trading situations. One of the great features of the Fibonacci ratios is the ability to reveal market information.
In this video, I demonstrated how you can use the Fibonacci to confirm a trend change or a retracement.
Enjoy!
How To Trade Quality Pin BarsAfter the Pin Bar Formed At The EMA 10 EMA 20, Do The Following Actions
Draw Your Fibonacci Retracement Levels
Draw Horizontal Support Levels
Enter At Pin Bar Close Price
Exit At The Previous Swing Low Level
The attributes that made this a quality Pin Bar:
Pin Bar Close Price is in the Fibonacci Retracement 50% and 38.2% Range Area
Pin Bar Close Price is in the EMA 10 EMA 20 Range Area
Pin Bar at Lower High
Downtrend
Technical Chart Of How To Trade The Pin Bar. Before and After Charts. Click on Charts.
A Comprehensive Guide to Fibonacci RetracementsHello traders, in this post, we will be going over one of the most commonly used tools in the equities (stocks), forex (fx), and cryptocurrency markets - the "Fibonacci Retracement". For a better viewing experience, please view this on your desktop/PC, as the mobile and tablet versions of the charts are harder to read.
Although I have briefly touched on how to use the Fibonacci Retracement tool in my previous Elliott Waves series, we are now going to go over it in depth, and talk about how this tool can help you find entries and exits within an existing trend, which also helps identify whether you are in a bullish or bearish trend.
The Fibonacci Retracement tool, although widely used by many traders, is almost always not correctly used by new traders. Most traders will often connect the wrong points, indicating the wrong Fibonacci retracement levels. Here, I will be explaining the proper way to use the Fibonacci Retracement tool in a very simple translated friendly guide in one guide.
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What Is the Fibonacci Retracement?
Fibonacci Retracements (Fib(s) for short), are a set of 'ratios', defined by mathematically important Fibonacci sequence. This allows traders to identify key levels of support and resistances for price action. Unlike other indicators, Fibonacci retracements are FIXED, making them very easy to interpret. When combined with additional indicators, Fibs can be used to identify potential entry and exit points with high probability to trade on trending movements. Fibonacci retracements are used to indicate levels of support and resistance for a stock’s price. Although they are similar to moving averages in this respect, Fibonacci retracements are set by the extent of the previous bullish or bearish run and do not change each day in the current trend as moving averages do. Therefore, it can be significantly easier to identify and anticipate support and resistance levels from Fibonacci sequences.
How Is the Fibonacci Retracement Calculated? (You don't need to calculate it yourself - It's already done for you!)
Fibonacci retracements are based on what is known as the 'Fibonacci sequence', where each number in the sequence can be added to the previous number to produce the following number within the sequence. Now, you might be confused here, but don't! - I am just explaining the concept on how it's calculated. You do not need to personally calculate the actual sequence of the Fibonacci Retracement, as everything is already pre-determined and calculated within the tool itself on TradingView. To put it simply, dividing any number in the sequence by the following number yields 1.6180 – known as the "Golden Ratio" – while dividing any number by its predecessor yields 0.6180. Dividing any number in the sequence by two positions in advance yields 0.3820, while dividing any number by a number three positions in advance yields 0.2360. These ratios emanating from the Fibonacci sequence are found throughout nature, mathematics, and architecture - such as flowers, buildings, and so forth. Yes, if you search for Fibonacci sequence examples, you can find these within daily uses, not only in trading.
Now, let's get into the meat and potatoes. Retracement levels for a stock/cryptocurrency are drawn based on the prior bearish or bullish movement. Don't forget this - you need to know whether you are in a bullish or bearish trend. Is the stock or coin going up? or down? To plot the retracements, draw a trendline from the low to the high (also known as the swing low to the swing high) within a continuous price movement trend – Fibonacci retracement lines should be placed at 61.80%, 38.20%, and 23.60% of the height of the line. Again, these numbers are already calculated for you within the tool itself. In a bullish trend, the retracement lines start from the top of the movement (i.e. the 23.60% line is closest to the top of the movement), whereas in a bearish movement the retracements are calculated from the bottom of the movement (i.e. the 23.60% line is closest to the bottom of the movement).
How to Trade Using the Fibonacci Retracement
Once you have drawn a set of Fibonacci retracements on a chart of your liking, it is possible to anticipate potential reversal points where support or resistance will be encountered. If the retracements are based on a bullish trend, the retracements should indicate potential support levels where a downtrend will reverse bullishly. So to put it simply, the pre-determined Fibonacci levels, should in theory and practicality, act as resistance. If not, there is almost 100% certainty, even if the support/resistance is not held, there will always be some form of price reaction at each Fibonacci level just based on the Market Psychology movements. If the retracements are based on a bearish movement, the retracements should indicate potential resistance levels where a rebound will be reversed bearishly, which is the vice-versa situation for the bullish movement trend.
The most common reversals based on Fibonacci retracements occur at the 38.20%, 50%, and 61.80% levels (50% comes not from the Fibonacci sequence, but from the theory that on average stocks retrace half of their prior movements). Although retracements do occur at the 23.60% line, these are less frequent and require close attention since they occur relatively quickly after the start of a reversal. In general, retracement lines can be considered stronger support and resistance levels when they coincide with the overall trend, meaning, that if you know that you are in an established bullish or bearish trend, you will most certainly get some form of reaction at the most common reversal levels within the Fibonacci level, which is shown in the image below.
Whenever applying Fibonacci retracements, keep in mind that retracement lines represent only potential support and resistance levels, they are NOT 100% set in stone – they represent price levels at which to be alert, rather than hard buy and sell signals; however, they have HIGH PROBABILITY. It is important to use additional indicators, in particular MACD, to identify when support or resistance is actually being encountered and a reversal is likely. The more that additional indicators are pointing towards a reversal, the more likely one is to occur. Also note that failed reversals, especially at the 38.20% and 50% retracement levels, are common.
Fibonacci Masterclass - Fibonacci Retracement and ExtensionHi guys, I have finally completed the thread on Fibonacci (Though it took longer than usual). I have tried with the best of my little knowledge to create this thread. This has everything you need to know about Fibonacci retracement and Fibonacci extension. Also, if the thread is free that doesn't mean I have compromised with the quality. All you have to do is just read this thread again and again until you get a good grasp of it. everything.
Table of Contents:
1. What Are Fibonacci Retracement Levels?
2. Significance of Fibonacci Retracement levels
3. Finding Fibonacci Retracement Levels
4. How to use the Fibonacci retracement levels?
5. What are Fibonacci Extensions?
6. Significance of Fibonacci Extension levels
7. Finding Fibonacci Extension levels
8. Difference Between Fibonacci Retracements and Fibonacci Extensions
What are Fibonacci Retracement levels?
• Fibonacci retracement levels are horizontal lines that indicate areas where the price could stall or reverse.
• These horizontal levels can act as a potential support or resistance levels
• They are based on Fibonacci numbers. Each level is associated with a percentage which means 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 50% is not a pure Fibonacci ratio, but it is still used as a support and resistance indicator. This is because people worldwide regard it as an important level.
• The price won’t always bounce from these levels. They should be looked at as areas of interest. Hence, please use the Fibonacci retracement as a confirmation tool.
Significance of Fibonacci Retracement levels
Fibonacci retracements can be used to:
• Place entry orders
• Determine stop-loss levels
• Set price targets
For example , A stock may be in an uptrend. After a move up, it retraces to the 61.8% level. Then, it starts to go up again. Since the bounce occurred at a Fibonacci level during an uptrend, you can enter long positions with a stop loss just below the Fibonacci level or at the candlestick low.
Finding Fibonacci Retracement levels
In order to find the Fibonacci retracement levels, you have to find the recent significant Swing High and Swing Low.
• For uptrends, select the Swing Low and then the Swing High.
• For downtrends, select the Swing High and then the Swing Low.
Example: Fibonacci retracement in an uptrend
Example: Fibonacci retracement in a downtrend
How to use the Fibonacci retracement levels?
If the price is approaching a Fibonacci level, you should look out for the following things at the point of interaction or in the vicinity of the level.
• Some reversal candlestick pattern
• Volume is above average.
• Moving average
• RSI divergence
• Previous S/R level or pivot level
The trade will be a high probability trade if some of these factors create a confluence zone.
What are Fibonacci Extensions?
• Fibonacci extension is a tool that can be used to find price targets or estimate how far a price may move after the retracement/pullback is over.
• Extension levels are also possible areas of interest where the price may stall or reverse.
• It can be used to find projected areas of support or resistance when the price is moving into an area where other methods of finding support or resistance are not applicable or evident.
• If in a stock, a new high/low occurs, the trader can use the Fibonacci extension levels to get an idea of where the price can go.
• Fibonacci extension levels can be calculated to give the trader ideas on profit target placement.
Significance of Fibonacci Extension levels:
• Fibonacci extensions can be used for any timeframe and in any market- stocks, commodities, cryptocurrencies, etc.
• Fibonacci extension levels indicate a price area that will be significant for the stock after the pullback/correction is over.
• Extension levels can be drawn on different price waves over time. When levels from these different waves converge at one price, that could be a very important area.
Finding Fibonacci Extension levels
In order to find the Fibonacci extension levels, you have to find the recent significant Swing High and Swing Low.
• For uptrends, click on the Swing Low and then on the Swing High. Then go to the Fibonacci setting and click on reverse. Or if your software directly has the extension tool then it’s even easier.
• For downtrends, click on the Swing High and then on the Swing Low. Then go to the Fibonacci setting and click on reverse.
Example: Fibonacci extension in an uptrend
Example: Fibonacci extension in a downtrend
Difference Between Fibonacci Retracements and Fibonacci Extensions
• Fibonacci retracements provide levels for a pullback whereas Fibonacci extensions provide levels to move in the direction of the existing trend.
• For instance, a stock goes from 50 to 100, and then back to 75. The move from 100 to 75 is a retracement. If the price starts rallying again and goes to 150, that is an extension because the price moved past the previous swing high which is 100 in this case.
This is everything you need to know about Fibonacci retracement and extension levels. This thread is more than enough to make you profitable. Keep reading and revising until you learn everything written in this post. I hope you find this post useful. Also, if anyone is interested in getting a consolidated PDF version of this thread, then you can message me, I'll provide it.
Disclaimer: This is NOT investment advice. This post is meant for learning purposes only. Invest your capital at your own risk.
Happy learning. Cheers!
@johntradingwick
Retracements and Expectations👨🏫 A students ask me to clarify a strategy I use when momentum trading using retracements in something I call the "Springboard Effect"
The theory is, the deeper the retracement after the initial impulse move the less chance of an extension or "strength" of the continuation.
I like to use the analogy of a Spring Board, (or diving board) and the stiffness of the board or the amount of "spring" it has 👇
🤔 Imagine we we have 4 different boards, all with a different amount of springs and we are going to drop the same amount of weight ⚖️ from the same height onto each board.
When we drop the weight onto the board that has lots of springs, it wont retract far before launching the weight high 🚀
If we drop the weight on a board that has a less springs it will retract further, but have less strength to launch the weight very high 🛫
If we drop the weight onto a board that has barely any springs then it will retract a lot and then struggle to even launch the weight higher than the height it was dropped from 😤
In this analogy.....
The height we dropped the weight from, is the top of the impulse move 📈
The different boards are the different fib retracement levels 🧮
The springs are the buyers at those levels 💵
How far it throws the weight is the strength or price action of the extension 💪
👉 A Bounce on the 382 tells us that there are plenty of buyers wanting to enter this market asap, this is a good sign that the extension could be strong. I like to target the 1.618 extension and or match it up to a level of resistance close by
👉 A bounce on the 50 tells me there is still a lot of bullish momentum but buyers where happy to buy it much lower, I'll still consider this bullish and target the 1.272 extension and match it up with some resistance close by or front run the level if I have to.
👉 A bounce on the 618 I dont really consider to be a strong move, I feel we will get a good bounce and may extend further, but I play close attention to the previous high incase we double top. I will look for things like candle stick reactions and use the CCI to spot divergence if momentum is lacking.
👉 A bounce on the 782 I consider a failure of the trend, I will expect buyers to still step in, but it will be a weak bounce and only really look to target other fib levels inside the retracement as potential resistance and this trade becomes more of a short term scalp.
I hope this makes sense and adds some value to your trading, peace ✌️
CONFLUENCE TRADING | YOUR KEY TO ACCURATE ENTRIES 🥇
If you are struggling with the identification of accurate trading entries,
you definitely should try confluence zones .
Note: there are hundreds of variations of confluence elements.
In this example, we will discuss trend lines and fibonnachi.
❗️To identify a confluence zone, the price must follow a trend line
(it should match higher lows if the market is bullish;
it should match lower highs if the market is bearish).
Once the trend line is confirmed by at least two touches and consequent reactions ,
you can look for a confluence zone.
1️⃣Project a trend line and identify the next POTENTIAL touchpoint of the market with a trend line.
2️⃣Take the last impulse in the direction of the trend.
Draw a fib retracement based on it
(swing low to swing high in case if the market is bullish,
swing high to swing low in case if the market is bearish).
3️⃣Take the previous impulse (it must be in the same direction as the initial one).
Draw a fib retracement based on it.
4️⃣Look for a match of retracement levels of the last two impulses and a projected trend line.
In case if two retracement fib.levels & trend line match, you found a confluence point.
5️⃣ Apply it as a safe entry point.
You will get a perfect trend following opportunity.
❤️ Please, support this idea with a like and comment! ❤️
⬇️ Subscribe to my social networks! ⬇️
EW FIBONACCI Ratios, FIB Retracement and Extension application !In this post, I'm going to focus on Fib Retracement and Fib Extension Ratios by Elliott Wave, and show you how to best use these tools.
Fibonacci ratios are mathematical ratios derived from the Fibonacci sequence.The Fibonacci sequence is the work of Leonardo Fibonacci.
Fibonacci sequence is used in many applications, movies and photography, space studies, stock market actions, and many other fields.
Fibonacci is a proven approach for measure price movement relationships. For Elliott heads, it means Fibonacci numbers are tools to help guide us in our interpretation where we think price movements will go.
The most common Fibonacci ratios used in the stock markets are:
1 - 1,272 - 1,618 - 2,618 -3,618- 4.23 (extension)
0.236 - 0.382 - 0.5 - 0.618 - 0.786 (retracement)
Let's start with Elliott Impulsive Wave rules !
Wave 1: the beginning of each wave and retracet with
Wave 2: may never retrace deeper than the beginning of wave 1
Wave 3: often the longest, but never the shortest
Wave 4: may never retrace below the top of wave 1
Wave 5: x
Fibonacci ratios :
Wave 2
The most common retracements we look for in a Wave 2 pullback are either a 0.5 or 0.618 retracement of Wave 1
We expect only 12% of Wave 2 to hold 0,382 retracements of Wave 1
We anticipate 73% of Wave 2 retracements between 0,5 to 0,618
We anticipate 15% of Wave 2 to retrace below the 62%
Wave 3
Wave 3 is related to Wave 1
Fibonacci relationships:
Wave 3 is either
1,618 length of Wave 1
or 2,618 the length of Wave 1
or 4,236 the length of Wave 1
The most common multiples of Wave 1 to Wave 3 are the 1,618 and 2,618
If Wave 3 is extending, we typically look for 4,236 or higher
Only approximately 2% will a Wave 3 be less than Wave 1
We anticipate 15% of Wave 3 trade between 1 and 1,618 of Wave 1
We can anticipate 45% of the time Wave 3 will push to between 1,618 and 1,75
We can anticipate 8% of Wave 3 will extend beyond 2,618 or higher
Wave 4
Wave 4 is related to Wave 3
0,236 of Wave 3 or
0,382 of Wave 3 or
0,50 of Wave 3 or
0,618 of Wave 3
We can anticipate only 15% of the time Wave 4 to retrace between 0,236 to 0,382
We can anticipate 60% of the time Wave 4 to retrace between 0,382 and 0,5
We can anticipate 15% of the time Wave 4 to retrace between 0,5 and 0,618
We can anticipate 10% of the time Wave 4 retrace 0,618 or greater
Wave 5
Wave 5 has two relationships. Wave 5 has a direct correlation to the Fibonacci relationship of Wave 3
1. If Wave 3 is greater than 1.62, or extended
Wave 5 is a 1 to 1
or 1.618 of Wave 1
or 2,618 of Wave 1
I don't know any statistics, but in my experience a 1.618 or 1 to 1 is the most likely
2. If Wave 3 is less than 1,618. Wave 5 will often overextend.The ratio of Wave 5 will be based on the length from the beginning of Wave 1 to the top of Wave 3
Extended Wave 5 is either 0,618 from the beginning of Wave 1 to top of Wave 3
or 1,618
Unfortunately, my english is not so good and I work with google translate, but if you have any questions I will be happy to answer them .
➡️If you like my posts smash the like👍👍 button, comment or follow me. It helps me to publish more free education, also on request ⬅️
Fib retracement and Extension application follow 📚
My new fibonacci levels toolHi crypto traders,
After many years of using Fibonacci retracement, my predictions started to be less relevant since Trading View started allowing to change the fib levels from regular scale to LOG scale. Since then I got confused especially with crypto that many coins 10x easily. So i decided to get my own fib levels tool (feel free to back test it on your own).
Basically, I took the Fibonacci sequence numbers of 21,34,55,89 as my fib levels to watch for retracement. For the number 76, I added fib number, 21, to 55 . Then I ‘ve noticed that between 21 and 34, the difference is the UNLUCKY number 13. Number 13, it is also the difference between 76 and 89. This gave me a confirmation that 76 is an important level to watch even if it is not a fib level.
Hopefully this is helpful for some people out there. From now on, I will be using those levels for my chart analysis.
Stay safe!