25.08.2019
AAKASHAYA PATRA SEVEN STAR SMART EDUCATION SERIES PART – 22
:
Fibonacci
Continue of last series Support and resistance areas
Since
so many traders watch these same levels and place buy and sell orders on them
to enter trades or place stops, the support and resistance levels tend to
become a self-fulfilling prophecy.
Fibonacci Retracement Levels -
To
calculate the Fibonacci Retracement levels, a significant low to a significant
high should be found. From there, prices should retrace the initial difference
(low to high or high to low) by a ratio of the Fibonacci sequence, generally
the 23.6%, 38.2%, 50%, 61.8%, or the 76.4% retracement. Retracement is based on
the numbers identified in Fibonacci sequence to define area of support and
resistance.
Once
these levels are identified, horizontal lines are drawn to indicate areas of
support or resistance at the key Fibonacci levels before prices continue to
move in the original direction.
When the market is in uptrend, go long (or buy) on a
retracement at a Fibonacci support level.
When
the market is in downtrend, go short (or sell) on a retracement at a Fibonacci
resistance level.
Fibonacci Extension Levels -
Fibonacci
Expansions are price levels created by tracking a price‘s primary move and its
retracement. The use of Fibonacci Extension is to find targets.
How
to use Fibonacci Extension?
In
an uptrend, the general idea is to take profits on a long trade at a Fibonacci
Price Extension Level. You determine the Fibonacci extension levels by using
three mouse clicks.First, click on a significant Swing Low, then drag your
cursor and click on the most recent Swing High. Finally, drag your cursor back
down and click on any of the retracement levels.The important key Fibonacci
extension levels are: 23.6%, 38.2%, 50.0%, 61.8%, as well as the 100%, 138.2%
and 161.8% extensions.You won‘t really need to know how to calculate all of
this. Your charting software will do all the work for you. Traders use the
Fibonacci extension levels as profit taking levels. Again, since so many
traders are watching these levels to place buy and sell orders to take profits,
this tool tends to work more often than not due to self-fulfilling
expectations.
Summary:
Fibonacci sequence
Fibonacci Retracement:
First Identify a
Trend (we will assume an up-trend)
Find the recent
swing high in price where price is now showing downward movement
Find the most recent
swing low
Start at the perceived Swing High and draw a Fibonacci Grid
(retracement tool) down to the Swing Low Your software should now fill in the
23.6% 38.2%, 50.0%, and 61.8% retracements of the swing you are measuring.
Fibonacci Extension:
Fibonacci levels give good places to enter trades and place stops
close to entry, giving the possibility for a low-risk trade idea, particularly
if it is confirmed by signals from other indicators or timeframes.
In an uptrend, the
general idea is to take profits on a long trade at a Fibonacci Price Extension
Level. You determine the Fibonacci extension levels by using three mouse
clicks.
First, click on a significant Swing Low, then drag your cursor
and click on the most recent Swing High. Finally, drag your cursor back down
and click on any of the retracement levels.
The important key Fibonacci extension levels are: 23.6%, 38.2%,
50.0%, 61.8%, as well as the 100%, 138.2% and 161.8% extensions.
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