Strategy With Fibonacci – We will use Fibonacci ratios in our trades so that you better learn and love him like cooking in your mother’s home. Fibonacci is a big subject and there are many different studies about Fibonacci, with a name that sounds strange but we will stick to two things, namely: retracement and extension.
Leonardo Fibonacci is not a famous chef. In fact, she is a well-known Italian mathematician, also known as the Ultra super duper Ubergeek.
He has an “Aha!” moment when he finds a simple series of ratio numbers created describing the natural proportions of things in the universe. The ratio arises from the following serial numbers: 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144…
Series of numbers obtained by starting with 1 followed by 2 and then adding 1 + 2 to get 3, the third number. Then, add 2 + 3 to get 5, the fourth number, and so on. After the first few numbers in descending order, if you measure the ratio of any amount to the next higher number, you get 0.618. For example, 34 divided 55 equals 0.618.
If you measure the ratio between the alternate numbers you get 0.382. For example, 34 is divided by 89 = 0.382 and it gets into the explanation as we will discuss.
This ratio is called “Golden Mean”. Okay, that’s pretty nonsense. With all the numbers, you can make an elephant fall asleep. Essentially, this is the ratio you SHOULD BE aware of:
Fibonacci Retracement levels 0.236, 0.382, 0.500, 0.618, 0.764
Fibonacci Extension Levels 0, 0.382, 0.618, 1.000, 1.382, 1.618
You don’t really need to know how to count all of this. Your charting software will do all the work for you. such as some indicators in MT4. However, it is nice also to be familiar with the basic theory behind the indicators so you will have the knowledge to impress your boyfriend.
Traders use Fibonacci retracement levels as the potential for support (support) and resistance areas (resistance). Because many traders then pay attention to the same levels and places buy and sell them to enter or close trades, and the level of support resistance tends to be a fulfilled forecast.
Traders use Fibonacci extension levels to take advantage levels. Again, because many traders are watching this level, this tool tends to be more frequently used.
Most charting software includes both Fibonacci retracement levels and extension-level tools. In order to apply the Fibonacci levels on your chart, you must identify the Swing High and Swing Low points.
High Swing is a candle with at least two lower highs on both the left and right sides of it itself.
Low Swing is a candle with at least two lows higher on both the left and right sides of it itself.
Did you get all that? Don’t worry, we’ll explain the retracements, extensions, and most importantly, how to grab a few pips using the FIB tool in the following sections.
The first thing you should know about the Fibonacci tool is that it works better when the market is in a trend.
The idea is to buy long (or buy) on the retracement at the Fibonacci support level when the market is trending up, and to sell short (or sell) on the retracement at the Fibonacci resistance level when the market is trending down.
In order to find the retracement level, you need to find a fairly important level of the Swings high and the Swing Lows. Then, for a downtrend, click on Swing High and drag the cursor to the latest low Swing. For Uptrends, do the opposite. Click on Swing Low and drag the cursor to the latest high Swing.
Uptrend Strategy With Fibonacci
Here we plan the Fibonacci retracement Level by clicking Swing Low on 1.3068 on 2019.01.27 and dragging the cursor to Swing High at 1.356762 on 2019.05.26. Tada! This magical software can show the retracement level!
As you can see from the chart, the retracement levels are 1.344521 (23.6%), 1.337797(38.2%), 1.33159(50.0%), 1.325728 (61.8%).
Now, our hope is that if USD/CAD retraces it from its recent highest point, it will find support/support at one of the Fibonacci levels because the trader will place a buy order at this level if the price rises back.
Downtrend Strategy With Fibonacci
As you see, we found Swing High at 1.35659 on the 2019.05.26 and Swing Low at 1.325728 a few days later on 2019.06.02. The retracement rate is 1.349348 (23.6%), 1.344866 (38.2%), 1.341245 (50.0%), 1.337624 (61.8%).
The expectation is that if the price retraces of this low price, it will face obstacles on one of the Fibonacci levels because the trader will be ready with a sell order there.
The best way to learn to read FIBONACCI patterns is to practice how to enter and exit transactions from the signals they emit. If you don’t want to trade in the immediate market, you can develop your skills in a risk-free by opening an FBS demo account.