How can I apply Fibonacci retracement levels to my trading?

The reason for this video in particular is really to look at questions regarding the use of technical analysis in my trading, you may know that I’m considered anti technical analysis and allot of people think that I hate technical analysis and that I’m completely against it, which is not quite true. I do actually use technicals in my own trading; my view point on technical analysis is that it should not be the ONLY thing that you use. So anyone who is just staring at a price chart and looking for signals and nothing else, that’s wrong.

What we’re going to look at today is a particular tool called the Fibonacci retracement tool you’ve probably heard of it if you’ve been trading for a while, if not I’m just going to give you a brief background on what Fibonacci is.

Fibonacci is basically a series of levels that can be applied to a measurement of price; it’s a tool that you can apply to the markets.

So for example let’s say the price moved from one point to another point, apply the Fibonacci tool on to the high of that move to the low of that move and it would give you a series of levels, these are called retracement levels.

Now basically all that is just a percentage of that move, so for example if the price moved up 100 pips and then fell back 50 pips the price has fallen back 50% of that initial move and vice versa downward move.

All that the Fibonacci does is it gives you these percentage levels so you can see exactly how far the price has pulled back before it continues. Now the Fibonacci retracement levels that are common are the 38.2% the 68% there is the 50% and there is also one called the 78.6%.

There’s lots of different percentages, without getting into too much detail with too much information as to what Fibonacci actually is, as there is lots of information freely available on how to trade Fibonacci and its history. I definitely recommend doing some research on the concept of Fibonacci in particular Fibonacci ratios as it is fascinating.

Now in trading the way I use retracements level is when the price goes up or the price goes down I’ll apply the Fibonacci tool just so I can visualise those retracement levels of that pullback, for example I can see when the price pulled back to 38%, I can see when it pulled back to 50% sometimes even when its pulled 62% so that I’ve got those visuals on my price chart I can then know that it’s a good time to get in.

If the price doesn’t fall back far enough very often I won’t look to get into that trade, so I want to wait for a nice big retracement and the reason for that is because when you’ve got conviction in a move when the price is going up and when I’m very confident from a fundamental perspective that the price can carry on going up further and it comes back against me. This gets me more excited because what that means is I know it’s going up, but actually it’s not and now I can get a really good price to get back in, rather than trade at the highs and taking less profits. So on these occasions I’m actually praying for those pullbacks and the Fibonacci tool is really helpful for you to visualise which pullback has occurred and where the price is relative to those levels.

That’s how I use Fibonacci my trading, I don’t just trade it blindly I’m not just looking at a chart and just trading Fibonacci levels on waiting for very specific news based on the fundamentals and if you’ve been following my post for a while you’ll know all about how I trade.

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Jarratt Davis is the world’s ranked #2 (2008-2013) Forex Trader by Barclays FX Hedge Index, following years of mastering his art as a self employed trader Jarratt has now entered the field of education and delivers the most robust Forex education package on the market. Jarratt’s mentorship is one of the only programs on the market that is conducted by a verified professional trader. Forex Alchemy readers can get the FREE mini course where Jarratt gives away some of his secrets to success by Clicking Here... [space height="20"] [social type="facebook"][/social] [social type="twitter"][/social] [social type="google-plus"][/social] [social type="youtube"][/social]

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