So you missed a nice uptrend? No worries, you can always profit from the bounces going down. If you don't know how to use Fibonacci I will explain. First you need to establish the lowest point (labeled in green) and the highest point (labeled in red). So first take the Fibonacci tool and line it up with the the lowest point. Next, take the Fibonacci and line it up with the highest point. Then you're done. You'll now be able to use the Fibonacci to find possible entries. You can see the first bounce occurred at the .236 and almost at the .382. Every level on the Fibonacci is a potential place for a bounce. In this example the Fibonacci appears to be off just a tiny bit. Rather than look for a chart that perfectly lines up and we see perfect bounces, I stuck with this one to show you guys that it's not always perfect. Sometimes you won't see a bounce at all. When I was first learning TA, I found it frustrating that the people who taught TA would show the perfect textbook example. I won't sugarcoat it. I'll show you that TA is very very useful but you can end up wrong. No analyst is 100% correct. Realistically you only need to be correct 50% of the time which sounds surprising but it turns out to be true when you use proper risk management. Had I adjusted the Fibonacci slightly everything would have lined up, however we wouldn't have known to adjust it until later on.
Moving back to the Fibonacci the .618 is considering the golden ratio. Google it if you want to learn more. This is the ideal place for a bounce to occur and has resulted in big moves up. You can see that price fell perfectly into the .618 pocket. Sometimes prices touches it and shoot back up, other times it slips slightly below the .618 into the "golden pocket". Had you bought in that in zone you would be up 13%. As a continuation of my previous post on divergence you can see bullish divergence occurring right before the bounce at the .618. So now you have two indications for a bounce. The .618 level and bullish divergence. Having multiple reasons to enter a trade will give you confidence as a trader. If you're not ready to trade your own money, then try back testing and paper trading until you feel confident with your abilities. Finally notice the bearish divergence that occurs on the left side of the chart. I am going to cover that in my next post.
Moving back to the Fibonacci the .618 is considering the golden ratio. Google it if you want to learn more. This is the ideal place for a bounce to occur and has resulted in big moves up. You can see that price fell perfectly into the .618 pocket. Sometimes prices touches it and shoot back up, other times it slips slightly below the .618 into the "golden pocket". Had you bought in that in zone you would be up 13%. As a continuation of my previous post on divergence you can see bullish divergence occurring right before the bounce at the .618. So now you have two indications for a bounce. The .618 level and bullish divergence. Having multiple reasons to enter a trade will give you confidence as a trader. If you're not ready to trade your own money, then try back testing and paper trading until you feel confident with your abilities. Finally notice the bearish divergence that occurs on the left side of the chart. I am going to cover that in my next post.
