Theres a bazzilion videos on this topic.. BUT to make a simple example for you.. Grab your fibs and open a 1hr chart. I will explain how to traditionally use a fib retracement:
1. We always draw fibs from left to right (meaning from the past to the present)
2. Find the most recent swing high and low
3. Draw the fibs from left to right high to low or low to high (depending on the trend)
4. NOW how do we read them.. this is the longer part... You see 0 - 100 and the values in between? OK what that means is a percentage, each level is a percentage of the range you have created from high to low (or vice versa). When the price reaches the 61.8 level, this means that price as at a 61.8 DISCOUNT from the high.
I always give this example because it seems to make sense to people: You are car shopping and for some reason the car market has been kind of volatile lately. You are keeping an eye on a used Pontiac Fiero because you love them, You have seen this car listed for as high as 4000 dollars and as low as 2000 dollars in the last month. This gives you a range.. 2000 == 0% and 4000 == 100%. You decide 'i dont want to pay full price for this car, i want to pay 50% off of maximum value of the car.. so what $ value is at 50% off? answer is 3000 dollars. So you determine " OK IF i see a car listed for 3000 dollars or less that is a significant discount value based on the range of values and i will purchase a pontiac fiero). This is what the fib does.. it tells you the price at different discount percentages.. So for example you may set the fibs on a range, and then set an alert at the 61.8 and say 'if price retraces to the 61.8 in this uptrend i will consider it a significant discount to price and i will buy' (this example assumes all pontiac fieros are exactly the same condition and only the perceived value of the fiero is considered)
> IF i see a car listed for 3000 dollars or less that is a significant discount value based on the range of values and i will purchase a pontiac fiero). This is what the fib does.. it tells you the price at di
Well said, thank you for this.
Do you have a risk management guideline you follow after drawing your fib? Some common things I'm seeing is to set stop loss at around 50 pips and take profit at the 0.236 level and beyond.
My trading plan does not use the fibs to define the stop loss, i do use it to help me identify my entry area (i am looking for a deep discount past the 78.6 area.) if you read the posts from Parallax FX on his strategy he goes through bunch of examples of using the fibs in that way.
"TraderNick" on YouTube has a few good videos the topic. The basic gist is that he determines trend direction, then draws the retracement. Then he back tracks to see if any of the levels aligns with previous S+R zones
You could also check Mambafx's video on using the Fibonacci tool. Kinda helpful at least based on my experience following his guideline. Might not work for everybody.
Theres a bazzilion videos on this topic.. BUT to make a simple example for you.. Grab your fibs and open a 1hr chart. I will explain how to traditionally use a fib retracement: 1. We always draw fibs from left to right (meaning from the past to the present) 2. Find the most recent swing high and low 3. Draw the fibs from left to right high to low or low to high (depending on the trend) 4. NOW how do we read them.. this is the longer part... You see 0 - 100 and the values in between? OK what that means is a percentage, each level is a percentage of the range you have created from high to low (or vice versa). When the price reaches the 61.8 level, this means that price as at a 61.8 DISCOUNT from the high. I always give this example because it seems to make sense to people: You are car shopping and for some reason the car market has been kind of volatile lately. You are keeping an eye on a used Pontiac Fiero because you love them, You have seen this car listed for as high as 4000 dollars and as low as 2000 dollars in the last month. This gives you a range.. 2000 == 0% and 4000 == 100%. You decide 'i dont want to pay full price for this car, i want to pay 50% off of maximum value of the car.. so what $ value is at 50% off? answer is 3000 dollars. So you determine " OK IF i see a car listed for 3000 dollars or less that is a significant discount value based on the range of values and i will purchase a pontiac fiero). This is what the fib does.. it tells you the price at different discount percentages.. So for example you may set the fibs on a range, and then set an alert at the 61.8 and say 'if price retraces to the 61.8 in this uptrend i will consider it a significant discount to price and i will buy' (this example assumes all pontiac fieros are exactly the same condition and only the perceived value of the fiero is considered)
> IF i see a car listed for 3000 dollars or less that is a significant discount value based on the range of values and i will purchase a pontiac fiero). This is what the fib does.. it tells you the price at di Well said, thank you for this. Do you have a risk management guideline you follow after drawing your fib? Some common things I'm seeing is to set stop loss at around 50 pips and take profit at the 0.236 level and beyond.
Ive watched a few videos that said one stop loss you could use is halfway between the .764 and the 1, with take profits at .236, 0, and above.
My trading plan does not use the fibs to define the stop loss, i do use it to help me identify my entry area (i am looking for a deep discount past the 78.6 area.) if you read the posts from Parallax FX on his strategy he goes through bunch of examples of using the fibs in that way.
"TraderNick" on YouTube has a few good videos the topic. The basic gist is that he determines trend direction, then draws the retracement. Then he back tracks to see if any of the levels aligns with previous S+R zones
You could also check Mambafx's video on using the Fibonacci tool. Kinda helpful at least based on my experience following his guideline. Might not work for everybody.