Once, you have understood the candlesticks pattern let’s move our learning towards another indicator named Fibonacci Trading.
As the Fibonacci levels are vast, will stick to two – Retracement and Extension. Fibonacci is named after the famous Italian mathematician Leonardo Fibonacci. He discovered a simple series of numbers that created ratios describing the natural proportions of things in the Universe.
The series of numbers is made by adding the first two numbers to form a third number continue it until it’s not fun anymore. For example the series formed: 0,1,1,2,3,5,8,13,21,34,55, 89,144 etc.
Fibonacci Trading Levels
You don’t need to calculate the ratios from the series formed. The Fibonacci calculator can calculate Fibonacci Retracement and Extension level for you.
The Fibonacci tool works best when the market is trending. It’s a long (or buy) on a retracement at a Fibonacci support level when the market is trending UP. Same for short (or sell) on a retracement at a Fibonacci resistance level when the market is trending DOWN.
Fibonacci Retracement Level
Fibonacci Retracement level is a forecasting horizontal lines that indicate the possible support and resistance level.
The theory is that after price begins a new trend direction, the price will retrace or return partway back to a previous price level before resuming in the direction of its trend.
Before finding these Fibonacci retracement levels, you have to find the recent significant Swing Highs and Swings Lows.
Fibonacci Extensions Level
Fibonacci Extensions Level used to find targets/take profits. It is an extended swing high & swing low in upcoming trend lines.
Fibonacci Trading Take-away
Remember, the trader views the Fibonacci Retracement level as potential support and resistance areas, and Fibonacci Extensions Level as potential support and resistance areas to set profit targets.
I will tell you how to become rich. Closed the doors. Be fearful when others are greedy . Be greedy when others are fearful.Warren Buffett