Most of you have heard about Fibonacci Retracement, some of you saw it and some even tried to use it on their own charts. So today I am going to explain how to use this instrument correcly.
Traders use the Fib Retracement tool in order to determine the nearest correction levels on the chart,.
If your task is to find out the nearest correction levels of upward movement, the level of 1.0 Fib Retracement. should be at the beginning of the movement and the level of 0 Fib Retracement at the end of it.
In simple words: if you are looking for upward motion correction, then 1.0 should be at the bottom and 0 at the top. If you are looking for a downward correction, then the opposite is 1.0 at the top (start of movement) and 0 at the bottom (end of the movement).
There are three types of correction by Fibonacci levels :
1. Bullish to levels 0,236 and 0,382. 2. Normal correction to the levels 0.50 and 0.618. 3. Bearish correction to 0.786 and 0.860.
When the movement is sharp, most often the correction will be minimal and will end at levels 0.236-0.382.
When the movement is corrected for a longer time, the correction comes to the levels of 0.50-0.618.
If the movement breaks down, the correction ends at levels 0.786-0.860.
In other words, in order to continue upward movement, as in the current BAND chart, we will be interested in levels of at least 0.236-0.318 and 0.50-0.618.
Near level 0.618, it is beneficial to catch the sharp impulses that occur due to the stops of market participants.
If the price movement comes to the level 0.786-0.860, then most often it is already its conclusion and it is dangerous to buy at such levels.
At the current bullish rally, the use of correctional Fibonacci levels will bring good results.
Share your setups in the comments and I would help you understand if you used it correctly!