When studying technical analysis many traders come across a variety of methods for determining support and resistance. One of the forex trading retracements used methods for finding these pricing levels includes Fibonacci retracements and trade zone.
Visually these points are represented on the graph by horizontal lines denoting support and resistance levels. Traders may use these lines in a variety of ways. Traditionally, traders begin to look for price to move from these levels back into the direction of the initial trend. It is important to remember that Fibonacci retracements can be used on a variety of charts as well as time frames. Once retracement levels are found, these technical points lend themselves to potentially trade a swing back in the direction of the primary trend. Forex momentum can give you a winning edge. The RSI is a Forex momentum indicator, and it is the best momentum indicator.
If you are going to use the RSI, the best way to use it is to trade long when it is showing above 50 on all time frames, or short if below 50 on all time frames. It is best to always trade with then trend. Look for a bullish price thrust that clears above the previous swing high with strong momentum. After price falls down to the retracement zone, buy above any bullish bar.
Look for a bearish price thrust that clears below the previous swing low with strong momentum. After price rises up to the retracement zone, sell below any bearish bar. The Fibonacci retracement is a trend following tool, and helps isolate where pullbacks may end and the trend resumes. Don’t place all your trust in it though. The price may not stop exactly at a Fibonacci level, rather the levels are just a guide.
Only use the Fibonacci retracement tool in conjunction with price analysis and as part of a complete trading plan. This entry was posted in Best Forex Trading Systems. Fibonacci retracements are percentage values which can be used to predict the length of corrections in a trending market. Fibonacci retracements were derived from the similarly named mathematic sequence, discovered by the 12th century mathematician known as Fibonacci. This sequence has been found in numerous objects throughout nature – from the number of the flower petals to the way the spiral galaxies in the outer space are constructed. Forex market being the largest market in the world most closely comes to operating like a huge natural mechanism whose behaviour can be explained by the laws governing other natural phenomena. This is the reason why fibonacci levels work so well on the forex market.
In the same fashion that the bigger numbers in the fibonacci sequence give closer ratios to 1. Quote: “The emotional crowd acts according to nature. Fibs uncover the concealed interface between mathematics and emotion as they predict how the herd will respond to price development”, Alan S. Farley in his book, “The Master Swing Trader: Tools and Techniques to Profit from Outstanding Short-Term Trading Opportunities”.
Quote: “Thomas of Aquinas described one of the basic rules of aesthetics—man’s senses enjoy objects that are properly proportioned. He referred to the direct relationship between beauty and mathematics, which is often measurable and can be found in nature. Man instinctively reacts positively to clear geometrical forms, in both his natural environment and in objects created by him, such as paintings. Note: All modern forex charting packages will draw retracement levels for you automatically – just pick a top and a bottom. Using Fibonacci Retracements in Forex Trading You can use fibonacci retracements to add to your existing position or to initiate new trades – in accordance with the underlying trend. CHF proved to be excellent levels to buy the pair.