The Fibonnaci Retracement, A Traders Best Friend
We all know what the fibonnaci is. But how do implement it into trading and how does it work?
The tool i use the most is the fibonacci retracement. You drag it across the chart. Drag it on starts to ends of trends and you have a fibonacci retracement now.
How does it work?
Now that you have drawn your fibonacci you see these ,,zones". The most common number used in fibonacci tools are 0.618 or 1.618, also known as the golden ratio. The most common example of the fibonacci retracement you'll see are rejections from 618 zone to 382. The 764 zone is thought to be a strong rejection zone. The 1 and -0.618 are thought to be reversal zones. Between 0.5 and 0.618 is the ,,golden zone" for shorts or longs.
Now lets say we have a fibonnaci with the numbers 1, 0, 0.5, 0.618, 0.764 and -0.618 and i draw it on a up trend from start to finish. What is most likely going to happen is the price will go into our ,,golden zone" and retrace up. Take profit will be -0.618 or 0. And our stops will be just bellow 0.764. You can customize your fibonnaci to your likings and test to see what works and what doesn't. The zones i recomend most are those i mentoned earlier in the example.
Remember to draw the fibonnaci on trends, NOT consolidation.
If you liked this little guide leave a like and share it to a friend ;).
The tool i use the most is the fibonacci retracement. You drag it across the chart. Drag it on starts to ends of trends and you have a fibonacci retracement now.
How does it work?
Now that you have drawn your fibonacci you see these ,,zones". The most common number used in fibonacci tools are 0.618 or 1.618, also known as the golden ratio. The most common example of the fibonacci retracement you'll see are rejections from 618 zone to 382. The 764 zone is thought to be a strong rejection zone. The 1 and -0.618 are thought to be reversal zones. Between 0.5 and 0.618 is the ,,golden zone" for shorts or longs.
Now lets say we have a fibonnaci with the numbers 1, 0, 0.5, 0.618, 0.764 and -0.618 and i draw it on a up trend from start to finish. What is most likely going to happen is the price will go into our ,,golden zone" and retrace up. Take profit will be -0.618 or 0. And our stops will be just bellow 0.764. You can customize your fibonnaci to your likings and test to see what works and what doesn't. The zones i recomend most are those i mentoned earlier in the example.
Remember to draw the fibonnaci on trends, NOT consolidation.
If you liked this little guide leave a like and share it to a friend ;).