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How
to
draw
Fibonacci
Lines
Let see, if we had for example a good downtrend and noticing the
market starting to slow down at the end and begging to correct
itself, then we would draw Fibonacci Retracement from the low of a
candle to the high of the candle (I use the ends of the bodies of the
candles).
if it's uptrend than we draw it the other way around from the high of
a candle to the low of the candle.
2.
Most
Important
Fibonacci
Levels
Fibonacci Retracement levels - you can see them all on the picture
below, during trading and in different situations each level could be
important but usually the most important are 50% and 61.8%,
though 38.2% and 78% also need to pay attention on.
3.
Main
factors
to
consider
4.
ways
to
trade
Fibonacci
Levels
watch the market without placing the Stop Loss and Take Profit,
some would place the Stop Loss slightly above the level 100% and
Take Profit around 138,2% or 161.8%. The best way is to watch the
market, analyze the situation and move Stop Loss every time the
market moves down.
The most important level 0.0%, usually if the market would brake it
it would mean that the trend will continue, if not it would mean that
the market changing the trend. In our example the market broke
that level and reached 161.8% and went lower. So we could walk
away with the profit around 100 pips, or we could continue follow
the downtrend, or we could close some positions around different
levels, it would depend on your style of trading.
If there is no good channel, like in our next example, then you could
look for 2 good full candles. Here we have an uptrend and the small
correction finished and market trying to brake the level 0.0%, but
we have to wait for one nice green candle to cross that level and
then we would wait for the second nice green candle which should
be bigger then the first candle and higher. Here we had 3 attempts
of braking the level - in first, which failed - it was a good candle
which crossed the line, but next candle was red, then small green,
red again; second attempt also failed - there were 2 green candles
which touched the level with the ends of their bodies, then red
candle, small green, red; finally the third attempt was successful good green candle crossed the level, after that there was green but
very small candle so we waited for the next good green candle,
which closed higher and it was a signal to Buy. After that we would
follow the trend as usual, changing Stop Loss, closing some or all
positions at level 161.8%. And if we are looking for downtrend then
the candles will be red and the second will be lower then the one
which must cross the level.
If you use these two ways of trading Fibonacci Levels you would
need few days, what I mean is - it could take you few days to find
the entry for trade or you could be in the trade for few days.
So now, how I use Fibonacci Lines in my day trading - I do not use
Fibo lines to enter the market I always draw the channel as you
know and use Fibo to exit the trade not just with my 10 pips but
bigger profit, if I can watch the market I would follow the trend and
change the stop, if I can't watch the market I would place the
orders to Take Profit for 10 pips as usual and additionally around
important Fibonacci Levels.
For best results it's always better to watch the market around
06:00am - 16:00pm GMT (or London +-1h) or later if there are
news. Or you can place the alarms around important levels, so you
can
control
the
situation
and
analyze
the
market.
Here is an example of my trade, I draw the channel as usual, I
identified the uptrend and it's correction, but I could not watch the
Finally, Fibonacci Lines could be used on any pair and time frame, I
usually use Monthly, 1H, 30m and 15M time frames.
Here are Fibonacci levels if you don't have them all you can add
them in Fibonacci Retracement - Fibo Properties.
0
0
0.236
23.6
0.382
38.2
0.5
50.0
0.618
61.8
0.78
78
1
100
-0.18
118
-0.27
127
-0.382
138.2
-0.618
161.8
-1
200
-1.618 - 261.8