imagine if you go long here and ride
this uptrend all the way to the top
that's more than 900 pips profit
watch till the end to learn how to use
the simple fibonacci retracement
strategy like professional traders
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hi traders in today's video we'll be
covering how to trade forex using
fibonacci retracement as well as going
over a simple fibonacci retracement
trading strategy with a high win rate
we'll have some practice examples at the
end of the video and apply what we learn
on real price charts
with that being said let's get into it
what is fibonacci analysis
12th century monk and mathematician
leonardo da pisa also branded as
fibonacci uncovered a logical sequence
of numbers that appears throughout
nature and in great works of art
these fibonacci numbers fit perfectly
into our modern financial markets
because they describe with great
accuracy complex relationships between
individual waves within trends as well
as how far markets will pull back when
they return to levels previously traded
in general fibonacci retracement levels
are some horizontal lines that indicate
where a possible retracement of a price
may occur the fibonacci retracement
levels define some key areas of support
and resistance to the traders
the fibonacci retracement levels are
associated with a single percentage
point these percentage points signify in
general how much of a previous price
impulse the price is currently retraced
to
these fibonacci numbers include 23.6
38.2
50
61.8 and 78.6 percent
the fibonacci indicator that's provided
on most of the trading platforms can be
handy as it indicates potential
retracement levels of stock forex pair
or a cryptocurrency
the fibonacci indicator can be drawn in
different ways usually by connecting two
key price points or a significant
impulse has occurred for example it can
be drawn by dragging the indicator from
a recent price high on the chart to a
current price low in this way you'll be
able to locate the potential
retracements of that significant price
impulse sounds complicated no worries
check out this example
this is the british pound usd 4-hour
chart i've added the fibonacci
retracement levels to the setup
keep watching as i'm going over a simple
method to add them to your trading chart
in the most accurate way
we can see this major uptrend
in general up or downtrend breakouts are
followed by a reversal or retracement
trend following
traders look for opportunities to enter
the market and ride the trend to its end
while fibonacci retracement provides
traders with vital function areas where
a pullback might reach the fibonacci
extension can help traders attain
literate profit targets for their trend
continuation entry orders
the first step is to identify the most
recent swing low and swing high always
stick to the most obvious ones if you
don't see a clear up trend just avoid
using any fibonacci retracement trading
strategy
we can see a clear uptrend here so we
proceed to draw the fibonacci
retracement levels
if you're on trading view you can find
the fibonacci tool right here simply
double click it and return to the setup
where we spot the a beat associated with
the trend
point a represents the very start of the
pound bull run against the us dollar b
is the swing high level in this example
we need to connect points a and b and c
so what does point c represent
as mentioned earlier the fibonacci
retracement strategy allows you to enter
the market during a price reversal phase
point c is the swing low that's formed
at the reversal stage and our entry
point this entry level is found thanks
to fibonacci retracement levels and some
basic price action factors
we need to drag the fibonacci
retracement tool from the swing low a to
the swing high b
we first click on the swing low and then
the swing high
and this will automatically plot our
fibonacci lines on the chart
thanks to the application of our
fibonacci retracement levels we can see
that the british pound has retraced to
the 50 fib level and has rejected it
will the pair continue in its upward
move
time will tell
however up to point c we can certainly
determine the market has found support
at this fibonacci level at a 61.8
percent fibonacci retracement before
buyers have come back into the market
so you might be wondering why the price
retraced to this particular level and
not another one
well there are multiple reasons
first of all we can see that this level
has already been respected previously in
trading the factor of history is
extremely important history repeats
itself
other than that this is the four hour
chart and each candle has a story to
tell
we can see that the uptrend resumed with
a bullish hammer candle which signifies
that sellers came into the market during
the period but by close the selling had
been absorbed and buyers had pushed the
price back to near the open
the hammer is followed by three white
soldiers pattern which consists of three
consecutive long-bodied candlesticks
that open with the previous candle's
real body and close above the previous
candles high this is a very strong
bullish signal that typically occurs at
the end of a downtrend
we can now go long immediately and place
the stop loss below point a and aim for
at least one to 1.3 risk to reward ratio
you can always use a trailing stop to
capture the maximum number of pips or
exit right after the moving average
lines cross over you can check out the
video we've made recently where we
tested the three moving average
crossover strategy i'll leave the link
at the end of this video
again we're expecting the trend to
resume at one of the following fibonacci
levels which are
23.6 38.2
50
61.8 or 78.6 percent
we've found these specific levels to be
the most effective in our trading as
they can represent turning points
if the price drops below 78.6 percent
you should avoid entering as there are
high chances that we are looking at a
trend reversal setup
so to sum up we need to draw the
fibonacci retracement levels
wait for a reversal as a first
confirmation and check the key levels
such as support and resistance as our
second confirmation the third signal is
the price action we should look for a
bullish or bearish candlestick pattern
before entering
let's look at another example before we
move on to the last part of the video
where i'll let you do some practicing
with market examples
this is the euro usd 4-hour chart
when applying the fibonacci retracement
trading strategy it's better to stick to
high time frames so you can be trading
with big institutions or what's called
smart money trading
we can notice a very strong downtrend
represented by multiple bearish candles
the price closed below the latest high
which signifies that we're dealing with
a trend reversal not a simple uptrend
retracement
we can see a pullback that defines our
low point b
now we need to draw the fibonacci
retracement levels on our chart
we always begin by point a and drag the
tool down to b once done we begin
observing the price action and wait for
any strong bearish candlestick pattern
we can notice a series of long bullish
candles with low or no tails which means
that the bulls are firmly in control a
small bearish candle forms followed by a
relatively upper and lower tail candle
this means that the buyers began exiting
their position as we approach the second
fibonacci level but this isn't enough to
enter the market in my opinion
let's continue looking for a bearish
sign
well the downtrend seems to resume and
the price went down with the spectacular
bearish engulfing candle
we can place our sell stop below the
closing price
stop loss should be located above point
a
that's another successful trait of more
than 250 pips
we can always check for trend
continuation signs in lower time frames
each chart tells you a story and the
most important part is practice
that's why i've prepared some practicing
examples
make sure to locate points a and b draw
the fibonacci retracement and think of
the right time to enter the market
let me know in the comments section if
you have any questions or a trading
strategy you want me to cover in a
future video
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you