Fibonacci secret
many new merchants get discouraged and suppose it’s too complicated to change with the
Fibonacci retracement tool, that’s why I desire to show you a first-rate and simple technique
which allows you to reap plenty of pips the usage of simply one retracement level. Let’s begin…
The first element we want to do is to be capable to identify the factors we’ll use for drawing the
Fibonacci retracement later on. I’ll talk greater about that in the next section. For this
report, we consider an excessive to be a swing high factor if it is preceded by two lower highs.
In contrast, we reflect inconsideration on a low to be a swing low if it is preceded by way of greater lows.
I’m going to exhibit you a very easy way to change using the Fibonacci retracement tool.
After you examine this report, it would possibly be the first time for you to see how simple
trading with Fibonacci can be.
2
Take note, now not all swing factors qualify for the method that I will exhibit you. We’ll only
consider swings that reach 100 pips or more, so we’ll use the crosshair tool to measure
the moves. You can discover this on your toolbar (Image 5), or simply spark off it automatically
by clicking on your mouse scrolled.
For an up move, we begin to measure from a swing low to a swing high (Image 3A), and
for a down move, we measure from a swing excessive to a swing low (Image 3B).
Now, let’s speak a little bit about Fibonacci retracements.
The first variety you see is the number of candles that formed that swing, the second
number is the variety of points, and the third wide variety is the rate at that level. To get
the pip value for 5 digit brokers, reflect inconsideration on the ultimate digit of points as the first decimal
place. So in Image 3A, you have 1067 points, which is equivalent to 106.7 pips. In
Image 3B, you have 1159 points, which is equal to 115.9 pips.
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The Fibonacci retracement suggests you the ratios of the Fibonacci collection of numbers.
The sequence goes from 0, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, and 144 and on to infinity. The
numbers after 0, 1 and two are computed by adding the subsequent two consecutive numbers.
The Fibonacci ratios are 0%, 23.6%, 38.2%, 50%, 61.8%, 78.6% and 100%, and so on
and so forth. These represent the mathematical relationships between the sequences of
numbers. Not to worry, in this method that I will show you, we will only pay attention
to one number, the 38.2% stage (Image 4).
This stage is regarded to be the most common Fibonacci retracement stage that price
almost always retraces to, especially on the EURUSD four hour chart after massive price
swings.
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So here’s how to observe the Fibonacci retracements on your chart. First, click on Insert,
select Fibonacci, and then Retracement (Image 5). Draw the Fibonacci retracement by
clicking on the lowest price and drag to the absolute best charge earlier than releasing your mouse
button. That’s for an uptrend.
5
Identifying the proper entry is a critical phase of the system. If we can do this, we are golden.
One of the high-quality ways to tell if rate has misplaced steam is to appoint an oscillator. I’ll show
you how to refine your entries by way of discovering clues as to when the charge will reverse and
using the Stochastic Oscillator to verify these clues.
First apply the Stochastic Oscillator on your 30 minute chart. Open your Navigator
window, then the Indicators list, and double click on Stochastic Oscillator. A dialogue
box will pop up where you can set the parameters. Use the default settings (5, 3, and 3) and
change the colors as you can see below. The Main Stochastic is blue and the Signal
Line is red. Once done, click on OK and you will see a separate window underneath your
chart.
The Stochastic Oscillator is composed of two lines, the Main Stochastic and the Signal
Line. Generally, if the Main Stochastic is above the Signal Line, we’re in an uptrend, and
if it’s under the Signal Line then we are in a downtrend. Price strikes tend to reverse
once the Stochastic reaches the oversold or overbought levels and crosses again out.
Alright, let’s get to some examples…
On the picture below, points A and B are valid swing points, and the go is about 112
pips. So this is our first clue that charge will soon retrace. The subsequent clue is that after the
long bullish candle, the charge is having a difficult time persevering with the up move. Another
indication is that price is unable to attain the previous resistance level. So, we practice the
Fibonacci retracement here.
Let’s see what’s happening on the 30 minute chart at this time.
Here, we will look for greater clues that the contemporary swing on the 4 hour timeframe has
ended and price has commenced to retrace. As you can see below, the charge had begun to
move in a range. This tells us that the up move is dropping steam. After the lengthy blue
candle, price became around proper away to the downside and shaped two bearish
candles.
The Stochastic went above the eighty degree so charge is viewed to be overbought and will
soon go down. This is later proven when the Stochastic crossed lower back beneath the 80
level as well.
All these matters tell us that charge is in a retracement, so we can enter a promote trade. In the
example above, we should enter at the close of the second bearish candle, at 1.2350.
The stop loss ought to be a few pips above the preceding swing high, which is at 1.23815,
and the take profit need to be right above the 38.2 level, which is at 1.2331.
Let’s take a look at a buy change example. On the photograph below, you can see a large move
up on the EURUSD 4 hour chart. It’s about 165 pips distance from point A to factor B, so
this is a qualified cross that is intended to run out soon. Another clue that tells us this price
will quickly retrace is the truth that the bearish candle tried to exceed the previous lows,
which can be regarded an aid level, but the fee went back up, unable to close
beyond that level.
Now let’s go to the 30 minute chart and appear for our entry.
On the 30 minute chart (Image 11), you can see the weak point of the cross down. You’ll
notice the small candles and the fee was once ranging for a while. The fee made its final
move down and was once observed by way of robust bullish candles.
If you look at the Stochastic Oscillator, you will notice that it has reached under 20 level,
which means the price is oversold ant it will soon go up. When the Stochastic crossed
back above the 20 level, this suggests that the price has started out to go up and we can
now enter a purchase trade.
the exceptional entry would be at the shut of the long bullish candle at 1.2257. The quit loss
has to be set a few pips below the preceding swing low, at 1.2222, to make positive that we
get out of the trade if fee goes the wrong way. The take income have to be set right under
the 38.2 level, which is at 1.2285.
It is necessary to be aware that we should solely think about entering a trade only if there’s
enough house to earn a income from the factor of entry to the 38.2 level. If the possible
entry rate is too close, then it’s best to pass by the trade. This approach has a very high
success rate if it is carried out properly. The quality issue you can do is to go lower back to the history
of your 4 hour charts and practice identifying these setups, and you’ll see how effective
this easy technique is.
Now you have every other exceptional and simple method to assist you end up a more
successful trader.
I hope you’ve discovered a lot from this report
To have the book with is diagrams and images clicking Fibonacci Retracement
or pest the bellow link on your browser
Sincerely,
Romeo Nehemiah
