In this case study, we unveil one of the overlooked yet most useful tools you will ever come across. By drawing a 100% , you can anticipate the reversals in price, due to:
- The side in control of the cycle takes profits off the table.
- Counter-trend positions are added by contrarian players.
- These are the areas where limit orders are found by market-makers.
As an example, we have picked the most recent activity in the EUR/USD , to guarantee that we don't cherry-pick the most convenient time to run this case study. Out of the 9 projections drawn in the span of 10 days, the results are as follow:
- In 7 occasions, the 100% projection represented the exact level where price turned around or paused before the resumption of the trend.
- In 1 instance, the 100% proj failed to be reached by a few pips (Oct 16)
- In the latest 100% proj on Oct 19, it was the only time that the 100% proj was shrugged off and price continued.
The way to draw the projection is by dragging the fibonacci tool from the latest swing up to the breaking point. You will be amazed at the accuracy rate of the 100% projection acting as a wall in response to the above reasons. Note, when fundamental-led interferences, the pricing of the pair will tend to disrespect these lines. The higher the potential of the event, the less relevant these drawings are, with one required t perform the same exercise from higher timeframes.
Get to practice this exercise on your favorite pairs. The more you do, the better you will get at picking your profits (full or partial).