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Sep 29, 2020 12:25 PM ET

Fibonacci Retracement trading Strategy


iCrowd Newswire - Sep 29, 2020

Fibonacci trading is a strategy based on determining several levels of a retracement depth. After a strong and sustainable trend, an asset price requires re-balancing of demand/supply ratio, buyers and sellers have to find an equilibrium, technical indicators have to reload the momentum, coming off overbought or oversold conditions. In other words, markets always move like waves and every single trend needs to regain power after correction in order to continue the price change in the same direction.

Forex traders can use both by-the-trend approaches when buying or selling an asset after the retracement is over or counter-trend reversal positioning in the market when prices breach a certain support or resistance level during corrections. Besides, the tool can also show the potential distance of the trend continuation and it is helpful in terms of finding perfect levels to take profits from previously opened deals. Indicators with Fibonacci levels are widely used in the technical analysis of any asset class and any timeframe. Daily and weekly technical outlooks traditionally contain an assessment of retracement levels when calculating support, resistance and possible reversal pivot points.

How to use Fibonacci Retracement Levels?

Fibonacci trading suggests using the indicator to buy or sell an asset, which bounced off support or resistance level, offering attractive prices in accordance with the general trend. At the same time, Fibonacci levels can be applied to analyse pivot points on a larger timeframe but when the trading is made on a shorter chart period. Besides, the instrument can point to rates where the profit-taking is reasonable.

How to apply the Fibonacci Retracement levels on a price chart?

First of all, traders should find a sustainable and clear trend on a price chart. After that, analysts have to determine the top and the bottom of the trend. Typically, the technical analysis is aimed to consider close rates as prices for the top and the bottom of the trend. However, some cases suggest taking high rates for the top and lows for the bottom. We’ll use the first option for all of the examples here and beyond as most of the technical indicators have mathematical formulas that take into account close rates but not highs and lows.








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