Finding Great Entries With Fibonacci Analysis
Finding Great Entries With Fibonacci Analysis
The
Fibonacci retracement is an extremely well-used tool for helping traders
identify levels of support and resistance. The tool comes as standard
on the MT4 platform and helps traders measure a swing in price and
identify key levels within that price swing which might serve as turning
points if retested.To get more news about Fibonacci Trading, you can visit wikifx.com official website.
In
the image above you can see that we have applied our Fibonacci
retracement tool to a bearish price swing. Price sold off from point A
to point B. Once price started to bounce from point B, we would apply
our Fibonacci retracement tool measuring from the top of the swing to
the bottom (and vice versa for a bullish move). The tool then plots on
our key Fibonacci levels to monitor. As you can see price initially
reversed from the 50% before travelling higher to test the 61.8% level
which ultimately sends price lower.
This is a clear example of
the basic way we can look to use Fibonacci retracement to identify
trading opportunities. This can be particularly helpful in trending
market helping us to enter as the market corrects, allowing us to get in
as the trend then resumes.
Quick Tip:
The Fibonacci
retracement tool highlights the key levels for us to monitor but we dont
know which, if any, will work. Traders should look to identify
confluence between key Fibonacci levels and other technical elements
such as price action signals, support & resistance, trend lines or
indicator readings to build a proper trade idea.
Looking at the
example again you can see that we actually have confluence at the 61.8%
Fibonacci level with trend line resistance coming in at that level also.
This suggests that this would be the strongest level to look to trade.
The Fibonacci Extension
The
Fibonacci extension is another classic analysis tool. This time, we
measure the price swing but instead of looking for levels within the
move which may serve as turning points if retested, we are looking at
projected levels which are yet to be tested but could serve as turning
points if they are.In the example, above you can see that we measure our
bearish price swing from top to bottom (vice versa for bullish move)
and this time the tool plots levels below the low of the swing point. At
point C you can see what happens when price meets the 127% extension,
it reverses and trades higher.
Again as with the retracement
tool, we can look to identify confluence at key Fibonacci levels to help
us identify the stronger levels to look to trade. Whereas we might look
to use the Fibonacci retracement tool to help us identify points of
correction in a trending market, the extension tool can be useful for
identifying potential trend reversal zones and can also be used as a
tool for setting profit targets whereby traders look to Bank any open
trades as they test the key extension levels.
Summary
As
you can see, Fibonacci levels can offer us powerful entry points to key
moves. The tools are simple to use and once you are confident in
tracking the right price swings you should be able to identify good
reversals. The beauty of this method of technical analysis is that it
really compliments other forms such as support & resistance,
indicator trading, price action trading and is a versatile way to
approach the markets.
评论
发表评论