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How to Use Fibonacci Retracements to Find Entry and Exit PointsAlright, traders, let’s talk about Fibonacci Retracements — the tool that’s part math, part mysticism, and all about finding those sweet spots for entry and exit. If you’ve ever wondered how seasoned traders seem to know exactly when to jump in and when to cash out, chances are they’ve got Fibonacci retracements in their toolbox (or they’re insider trading). What Are Fibonacci Retracements? Fibonacci Retracements are based on the famous ​​Fibonacci sequence — a string of numbers discovered in the 1200s by the medieval Italian mathematician Leonardo of Pisa (later nicknamed Fibonacci, meaning "son of Bonacci"). The sequence of numbers starts with 1, 2, 3, 5 and grows by adding the sum of the two previous numbers. These mystical numbers show up everywhere from pinecones and seashells to the human hand and the Apple logo and, of course, the charts. It all comes down to 61.8%, the golden child of market moves and corrections. But before you go off believing Fibonacci is some sort of market sorcerer, let’s break it down. The Key Levels 23.6%, 38.2%, 50%, 61.8%, 78.6% : These are the Fibonacci retracement levels you’ll see on your chart when you whip up the Fibonacci Retracement. They’re acting as the market’s pit stops — areas where the price could take a breather or reverse altogether. Traders use these levels to predict how far a price might pull back before resuming its trend. Put simply, it’s like finding the market’s sweet spot where it says, “Enough with the chit-chat, let’s bounce.” How to Use Fibonacci Retracements Identify the Trend : First, you need a clear trend — trace a price trajectory and make sure there is a well-defined and sustained move either up or down with a clear reversal at the end. No trend? No Fibonacci. Draw the Retracement : Stretch the Fib tool from the start of the move (swing low) to the end (swing high). If the trend is up, draw from low to high. If it’s down, high to low. Watch as those golden ratios light up your chart like a Christmas tree. Now you’ve got your levels mapped out and you can easily start looking for the potential turning points. Spot the Bounce : The series of horizontal lines on your chart — these are your Fibonacci levels, and they’re not just pretty—they’re potential support and resistance zones. When the price retraces to a Fib level, it’s decision time. Will it bounce, or will it break? The 61.8% level is the big one — the golden ratio. If the price holds there, it may be a sign that the trend could continue. If it breaks, well, it’s time to reassess. Think of it as the market’s line in the sand. Finding Entry Points Here’s where it gets interesting. Imagine the market’s been on a bull run, but then starts to pull back. You’re itching to buy, but where? This is where Fibonacci levels shine. When the price retraces to a key Fibonacci level (say 38.2% or 50%), it’s like the market is pausing to catch its breath. That’s your cue to consider entering a position. You’re aiming to ride the next wave up once the market finishes its coffee break at one of these levels. Nailing Exit Points On the flip side, if you’re already in a trade and looking to lock in profits, those same Fibonacci levels can be your guide for exiting. If the price is approaching a key level from below, it might be time to secure your gains before the market pulls another U-turn. For the bold and brave, you can even set your sights on the 161.8% level — this is where Fibonacci extensions come into play. It’s a target for when the market decides it’s not just going to bounce, but rocket into the stratosphere. Pro Tip: Fib Confluence Looking to up your game? Combine Fibonacci with other indicators like moving averages or trendlines. When multiple signals converge around a Fib level, it may be a strong confirmation that the trend could turn. Pay attention and always do your own research — fakeouts are real. Why It Works (and Why It Doesn't) Some say Fibonacci levels work because they’re rooted in natural mathematics. Others believe it’s a self-fulfilling prophecy because so many traders use them. And just like any strategy, it doesn’t work 100% of the time. The market has a mind of its own, and sometimes it just doesn’t care about your Fibonacci levels. But when they do work, they can give you a serious edge. The Bottom Line Fibonacci Retracements aren’t just a bunch of lines on a chart — they’re your reminder that maybe everything is indeed one from the universe’s perspective and there are naturally occurring patterns everywhere. Whether you believe in the math and the or just like the results, one thing’s for sure: Fibs can give you an edge in spotting when to hold back or lean forward. So next time you’re stuck wondering when to buy or sell, try the Fibonacci.
Education
by TradingView
12
From Leonardo to Trading: The Evolution of Fibonacci LevelsIn the labyrinthine landscape of financial markets, where volatility reigns supreme and uncertainty lurks around every corner, traders seek reliable navigational tools to steer through the tumultuous waters of price movements. Among the myriad techniques at their disposal, Fibonacci analysis emerges as a stalwart companion, offering a nuanced understanding of market dynamics rooted in mathematical precision. In this comprehensive exploration, we delve deep into the multifaceted realm of Fibonacci levels, unraveling their historical significance, evolutionary trajectory, practical applications, and the diverse perspectives that shape their interpretation. Tracing the Roots: To appreciate the profound impact of Fibonacci analysis on modern trading methodologies, a journey back in time to the 13th century is warranted. It was during this epoch that Leonardo of Pisa, known colloquially as Fibonacci, unveiled a numerical sequence that would transcend mathematical realms and find profound resonance in the domain of financial markets. Beginning with 0 and 1, each subsequent number in the sequence is the sum of the two preceding ones, laying the groundwork for a sophisticated understanding of market movements rooted in the natural order of mathematics. Evolution in Financial Analysis: While Fibonacci himself might not have envisaged the application of his sequence in financial markets, the 20th century witnessed a paradigm shift as visionaries such as Ralph Elliott and Robert Prechter pioneered its integration into trading methodologies. Elliott's Wave Theory, with its emphasis on repeating patterns and sequences, forged an intriguing connection with Fibonacci numbers, laying the groundwork for a symbiotic relationship between mathematical principles and market analysis. This union catalyzed a renaissance in technical analysis, ushering in an era where Fibonacci levels became indispensable tools in the arsenal of traders worldwide. Unveiling Fibonacci Retracement Levels: At the heart of Fibonacci analysis lies the concept of retracement levels, a cornerstone of technical analysis that echoes the natural order observed in the Fibonacci sequence. These levels, including 23.6%, 38.2%, 50%, and 61.8%, serve as pivotal markers in identifying potential zones of price reversal, offering traders valuable insights into market sentiment and trend dynamics. By applying the Fibonacci retracement tool to significant highs and lows, traders gain a nuanced understanding of market psychology, discerning the underlying rhythm of price movements amidst the chaos of market fluctuations. Venturing into Fibonacci Extension Levels: Beyond retracement levels, Fibonacci extension levels offer a panoramic vista into the future trajectory of price movements, illuminating the path for traders seeking to navigate the complexities of trending markets. With extensions such as 161.8%, 261.8%, and 423.6%, traders can delineate potential targets for price continuation after a correction, harnessing the mathematical harmony inherent in the Golden Ratio to set profit targets and manage risk effectively. These extension levels, rooted in the timeless principles of Fibonacci analysis, serve as guiding beacons for traders navigating the ever-shifting tides of financial markets. Practical Applications and Precautions: While Fibonacci levels furnish traders with a potent framework for analysis, it is essential to exercise caution and supplement Fibonacci analysis with corroborating indicators and risk management strategies. By integrating tools such as Moving Averages, Relative Strength Index, and candlestick patterns, traders can enhance the robustness of their trading decisions, mitigating the inherent uncertainties of financial markets and maximizing the efficacy of Fibonacci analysis. A Tapestry of Perspectives: As we reflect on the journey of Fibonacci levels through the annals of financial history, we encounter a tapestry of perspectives that weave together to form a rich tapestry of knowledge and insight. From Larry Pesavento's exploration of harmonic price patterns to Philip Carret's pioneering work in long-term investing, the legacy of Fibonacci continues to inspire and guide traders in their quest for market mastery. These diverse perspectives underscore the enduring relevance of Fibonacci analysis in an ever-changing landscape, reaffirming its status as a timeless ally in the pursuit of profit and prosperity. Conclusion: In conclusion, the comprehensive exploration of Fibonacci analysis reveals its enduring significance as a cornerstone of technical analysis in financial markets. From its humble origins in the mathematical treatises of Leonardo of Pisa to its integration into modern trading methodologies, Fibonacci analysis embodies the timeless principles of mathematical harmony and market psychology. As traders navigate the labyrinthine paths of price movements, they find solace in the elegant simplicity of Fibonacci analysis, a steadfast companion in their quest for success amidst the ever-shifting currents of financial markets. Thank you for reading! I hope this article proves to be interesting for all of you!
Education
by FOREXN1
4
THE METHOD : A RELIABLE, REPEATING, CONSISTENT CRYPTO PATTERN I have an archive of screenshots of this, going back years. After my crypto baptism of fire, using all the money I'd earned from my first international art sale, knowing nothing and choosing leveraged trading for it's potential returns, I initially set out to find the perfect pattern that I thought I sensed when I looked at a financial chart for the first time.. And yes.. To recover my initiation fees also.. I lasted all of 4 hours.. But I was hooked.. This is my ongoing account of what I found and how it all fits together to explain visually and without any "it kinda works" theories. It's clear as day, and it blows my mind every time I see it. Will keep posting new ones as they occur. Please note that I'm not on a pattern hunt. I'm only tracking them on the coins I'm interested in at the time.. Currently: BIGTOE
Education
by Rebelmedia
Jumping S-curvesIn this post, I will explain what jumping S-curves means and how you can identify potential S-curves before they jump . First, let's begin with the chart above (also copied below). This is a yearly chart of McKesson Corporation (MCK), a medical supplies company. As you can see in the chart below, this stock has been soaring over the past year despite most other stocks being significantly lower. Here is the performance of the S&P 500 over the same time period. Whenever I see something highly unusual in a chart, such as extreme outperformance, I check the higher timeframes to see what's driving price on a technical level. Below is the yearly chart for MCK. When I examine price action over a long time period, I always log adjust my chart. Below is the log-adjusted chart. Upon seeing this chart I immediately knew what was going on: the stock price jumped S-curves. I will try to illustrate below how I reached this conclusion. To begin, I drew Fibonacci levels from the last reaction low to the last reaction high on the yearly timeframe. The previous reaction low was the bottom of 2008 because that bottom was a Fibonacci retracement of some earlier reaction high, the reaction high is the top in 2015 because price did not surpass that high without first undergoing a Fibonacci retracement (to the golden ratio). As you can see above, from 2015 to 2018 the price retraced down to the golden ratio (0.618) on the yearly chart. It is often from this retracement level that the base of the second S-curve is created. (For simplicity, I only included the 0.618 Fibonacci level on the chart). Some may say that this pattern is merely a bull flag or pennant. (See chart below) Indeed, bull flags and pennants can be another way to visualize S-curve jumps. Whereas, on a deeper, more mathematical level, S-curve jumps are logarithmic spirals (approximated as Fibonacci spirals or Golden spirals). If you wish to delve deeper into logarithmic spirals, including the Golden spiral, you can check out this Wikipedia page: en.wikipedia.org These Fibonacci or Golden spirals are present on mostly every chart and they appear on mostly every timeframe (hence they are fractal ). One of the best charts you can use to visualize these spirals is the chart of Bitcoin. Below are charts of Bitcoin which attempt to show the endless fractal nature of Fibonacci spirals (or "S-curve jumps"). I've only illustrated a few of the spirals, but indeed there are numerous spirals. (I tried to do my best using the tools on Trading View to draw these spirals, but it can be quite hard to manipulate the curves perfectly to price action.) One may ask what about when price falls? That is obviously not an S-curve jump since the price is falling. Actually, when price is crashing it is usually just an S-curve jump, or Fibonacci spiral, on the inverted chart. Although I have not tested it with scientific rigor, I do hypothesize that Bitcoin's price movement is a series of infinitely fractal and competing Fibonacci spirals on various timeframes, including Fibonacci spirals on inverted scales. Price movement can be thought of as an infinite series of S-curve dilemmas where infinitely fractal S-curves, including those of which are inverse S-curves, compete to govern the next price move. Each dilemma is resolved when an S-curve reaches its inflection point, such that it governs price movement and price moves rapidly in that direction until it approaches capacity and faces its next dilemma. Those who know Calculus may recognize this chart. Indeed this is the graph of a logistic function. The mathematical terminology for an "S-curve" is sigmoid function . Here are some more interesting charts of S-curves (none of which is intended to be investment advice) Meridian Bioscience (VIVO) jumps S-curves on its yearly chart The U.S. Dollar Index jumps S-curves on its yearly chart The entire price action of Chinese EV Company (NIO) is an S-curve that just completed a perfect golden ratio retracement Japan's faces a population S-curve dilemma Citigroup underwent S-curve growth up until the Great Recession. Then it crashed or underwent S-curve growth on the inverted chart. In summary, price movement involves an endless series of S-curves or Fibonacci spirals. Identifying an S-curve on a high time frame before it reaches its inflection point and breaks out can lead to tremendous gains (among the most lucrative gains one can realistically make in the financial markets).
NYSE:MCKEducation
by SpyMasterTrades
22
FibonacciHello, Let us talk about 'Fibonacci.' On this chart: You will read about where it came from? Why do we use it, and where does it help us. Before we dive in to talk about Fibonacci Retracement levels and their use in trading, Let us talk about the origin of Fibonacci : It all started with rabbits. Yes, Rabbits! Fibonacci became interested in a strange issue in 1202. He wanted to know the outcome if he had a pair of male and female rabbits and defined behavior for their offspring. The assumptions were as follows: We have a pair of male and female rabbits that have just been born. Rabbits mature after one month. The gestation period of rabbits is one month. When a female rabbit reaches puberty, she must become pregnant. At each pregnancy, the female rabbit gives birth to one male rabbit and one female rabbit. Rabbits never die. Calculate how many pairs of this type of rabbit we will have after n months? In mathematics, the Fibonacci sequence or series is the following infinite sequence of natural numbers: 0,1,1,2,3,5,8,13,21,34,55,89,144,233,377,610,987,1597,... Take a look at this GIF, to get an idea of this infinite sequence: drive.google.com The Fibonacci spiral: an estimate of the golden spiral generated by drawing circular arcs attaching the facing corners of the squares adjusted to the values ​​of the sequence; by successively attaching squares of side 0, 1, 1, 2, 3, 5, 8, 13, 21 and 34. The sequence begins with the numbers 0 and 1; "each term is the total of the past two" is the recurrence relation that defines it. The elements of this sequence are called Fibonacci children. Leonardo de Pisa described this sequence in Europe, a 13th-century Italian mathematician also known as Fibonacci. It has numerous applications in computer science, mathematics, and game theory. It also appears in biological configurations, such as in the branches of trees, in the arrangement of leaves on the stem, in the flowers of artichokes and sunflowers, in the inflorescences of Romanesco broccoli, in the configuration of coniferous conifers. In the reproduction of rabbits and in how DNA encodes the growth of complex organic forms. Similarly, it is found in the spiral structure of the shell of some mollusks, such as the nautilus. Leonardo Pisano, Leonardo de Pisa, or Leonardo Bigollo, also known as Fibonacci, was born in 1170 and died in 1240. Long before being known in the West, the Fibonacci sequence was already described in mathematics in India in connection with the Sanskrit prosody. Susantha Goonatilake notes that the development of the Fibonacci sequence "is attributed in part to Pingala (year 200), later associated with Virahanka (about 700), Gopāla (about 1135) and Hemachandra (about 1150)". Parmanand Singh cites Pingala (around 450) as a forerunner in the discovery of the sequence. Now let us talk about Fibonacci in the finance world. You might use it too, as Fibonacci Retracement Levels. (As you see on the chart) The second law of technical analysis indicates that values move in trends, bullish or bearish. Once a trend has given sufficient signs of termination, either by breaking its trend line, confirmation of a trend reversal figure or any other valid factor according to technical analysis theory, the analyst contemplates the possibility of a setback. A pullback represents, in simple terms, a move in the opposite direction to the past trend. It can take the form of a crash in price after a bullish move or a rebound in price after a downtrend. Although the first could properly be called a retracement and the second rebound or rally, technically, the term retracement includes both. Within technical analysis, Fibonacci retracements refer to the possibility that the price of a financial asset will retrace a considerable portion of the original movement and find support or resistance levels at the levels set by the Fibonacci numbers before continuing. The above address. These levels are constructed by drawing a trend line between the extreme points of the movement in question and applying the critical percentages of 23%, 38.2%, 61.8%, 76.8%, and 100% to the vertical distance. Fibonacci retracements are used to confirm suspicions of a market movement. Levels of support and resistance can indicate possible bullish or bearish market trends and indicate to people when is the best time to open long or short positions. This means that Fibonacci retracements can be highly fulfilling for people who know when to use them correctly. Upon confirmation of rejection in the price, we will try to calculate the probable magnitude of the movement. In order to achieve this, specific percentages collected from the Fibonacci series are applied to the total magnitude of the previous trend. The percentages used are as follows: 61.8%: Also recognized as the Golden Ratio, or golden number, it is the limit of the result obtained from the division of an element of the Fibonacci series by the following number, as the series tends to infinity. 38.2%: It is obtained by subtracting 61.8% from the unit (1.000 - 0.618) 100.%: Equivalent to the total magnitude of the primary trend. Reversal percentages should be calculated after the end of a trend has been confirmed, never while the trend continues. Considering that trends are always part of a longer-term trend and, in turn, are made up of shorter-term trends, the question on which of these trends should be calculated as setbacks? There might not be a simple answer. We must calculate the setbacks on that trend that has given clear signs of termination in general terms. A weak trend may have a 31.8% retracement, while a powerful trend may have a 61.8% retracement before returning to its original direction. Some sources mention a critical zone of 33 to 38.2% and 61.8 to 67% instead of specific levels. Fibonacci retracements form an essential part of the Elliott Wave Theory. The most scathing criticisms against Fibonacci retracements are based on the random walk theory, arguing that there is no justification for assuming that price action has any reason to respect predetermined retracement levels. However, it is not suitable to use Fibonacci retracement all the time. There are a few downsides too: Fibonacci retracement shows only static price levels. It is unlikely to say that a specific cryptocurrency price will not pass or stay below predicted levels. Many external factors determine the price of a coin. They have to be taken into account when determining trading decisions. Fibonacci retracement levels are close to each other, so it is challenging for a professional trader to determine the accuracy from which to predict the value of a particular coin in the future. Suppose you're interested in using this great indicator. In that case, you can simply go on your TradingView chart and the dashboard, click on 'Indicators & Strategies' and search for Fibonacci and find the best one suited for you. Have you ever used this indicator? What do you think the pros and cons are? Let me know your ideas. Good luck.
Education
by ShawnMCR
19
TYPES OF FIBONACCI's & WHEN TO USE THEM 📐📏 Hey traders, In this article we will discuss two very popular Fibonacci tools: Fibonacci retracement and extension. 1️⃣Fib.Retracement tool is applied to identify a completion point of a retracement leg within an impulse. As you know price action has a zig-zag form. For example, in a bullish trend, the price tends to set a higher high then retrace and set a higher low before going to the next highs. In a bearish trend, the price tends to set a lower low and retrace to a lower high. With retracement levels, we are trying to spot the point from where the next impulse in a bullish or bearish trend will initiate based on the last impulse leg. Fib.levels that we will apply are: ✔️0.382 ✔️0.5 ✔️0.618 ✔️0.786 The retracement levels will be drawn based on XA impulse leg. From its low to high if the impulse is bullish and from its high to low if the impulse is bearish. From one of the above-mentioned levels, a trend-following movement will be expected. One should apply different techniques to confirm the strength of one of these levels. 2️⃣Fib.Extension tool is applied to identify a completion point of the impulse. In a bearish trend, the extension levels will indicate a potential level of the next lower low based on the length of the last bearish impulse. Fib.levels that we will apply are: ✔️1.272 ✔️1.414 ✔️1.618 The extension levels will be drawn based on XA impulse leg. From its low to high if the impulse is bullish and from its high to low if the impulse is bearish. From one of the above-mentioned levels, a retracement leg will initiate. One should apply different techniques to confirm the strength of one of these levels. Of course other ways of application Fib.Retracement and Extension levels exist. However, these two are the most common. How do you use these levels? ❤️Please, support this idea with like and comment!❤️
BITSTAMP:BTCUSDEducation
by VasilyTrader
161
MY FIB SPEED RESISTANCE FAN TRADING STRAT : ) Hi! I'm xtekky and this is my tutorial on how to use the Fibonacci speed retracement tool- I used Apple (AAPL) as an example to display the tutorial. Steps: (1) Open the fib retracement section on the left bar and select the " Fib Speed Retracement Fan" (2) According to your trading style, select the timeframe I indicated in the chart - to begin with - you can then choose the timeframe you are most comfortable with. (2) Define the begin of an uptrend (after last retracement or reversal) and place your first point (3) Define the end of the uptrend (after last retracement or reversal) and place your second point - if there isn't any recent retracements / reversals, you can take previous ones or the highest recent value (4) Define the most relevant percentage (38.2% on this chart) but it may as well be another level - note that fib levels 38.2% and 61.8% are often the most relevant ones (5) Let the stock / crypto test the level once or twice to make sure it holds, you can of course jump in directly if you are confident. (6) Take Longs and Shorts in the "Channel" Advanced: (7) Use momentum reversals (Squeeze Momentum from @LazyBear is the best indicator for me) to define more precisely when to jump in - note that the price doesn't always trade in the channel, there are some false breakouts and/or the price sometimes reverses a bit further. (8) Use volume support / resistance zones (9) Include Imbalances in the prices (If the Crypto/Stock you trade has a high volatility/manipulation rate) If you want more complex tutorial, you can see a more detailed vid on the Ytb profile linked to this Tradingview account Disclaimers: !! This is not an investment advice and you shouldn't use this technique alone !! !! Never invest/trade with more money than you can afford to loose !! ------------------------------------------------------------------------------------------------------------------------------------------------------------ That's pretty much it! don't forget to ask or DM if you have any questions! If you want to follow me on this long journey ahead of us, you can support me by subbing and liking the post ! -Credits to xtekky-
NASDAQ:AAPLEducation
by xtekky
1
HOW-TO: FibDev Indicator This tutorial is to explain our FibDev Indicator using AMD 15m chart example. Overview of the daily zones: -- Starting with red zones, these are our daily supply zones. We expect these zones provide resistance and act as potential pivot points for the price to reverse -- The yellow zone is the neutral zone, when price is in this zone we expect that it will continue to chop around until it has chosen a direction for the day. -- The green zones are demand zones. Similar to the supply zones, we expect these zones to provide support and act as possible pivots for the price to rebound -- These zones are built based on previous daily price action and ** the zones will be the same on all time periods for any given day ** Overview of the intraday clouds: -- The upper cloud (red outline) is where we expect to encounter an overbought condition, and that price may reverse down -- The lower cloud (green outline) is where we expect to encounter an oversold condition, and that the price may rebound upwards -- These clouds are built based upon ** the time period of the chart that is selected **. Thus the 5m clouds will be different than the 15m clouds. Overview of the automated signals: -- These signals are printed when we expect there is a chance of trend reversal. It should be noted that trading against the trend is very risky. -- They do NOT serve as buy and sell signals, they are merely indications that price has entered a place of possible reversal. Our thoughts on how to use this data: --The main way we like to use this is by looking for scenarios where we have a wick or close that has broken above or below the intraday cloud at the same time that it is testing a supply or demand zone. Looking at this AMD example here, you can see a few scenarios where it wicked or closed into the lower cloud (some creating Bull signals) and was also testing a demand zone. This provides a layer of confluence as it's not only testing a daily demand zone but it's also testing the faster, intraday oversold zone (the lower cloud). -- A secondary way to use this data is similar to the ORB strategy, where you essentially chase (or ride the momentum) the price once it has broken to the upside or downside of the yellow neutral zone. With this strategy, your potential profit zones would then become the supply or demand zones depending on which way the price moved. Conclusion: -- Ultimately it's up to you and how you choose to use this data and confluence it with other TA tools is completely up to you and your trading strategy. -- For more information on using this indicator, please send us a message here or on Twitter (link found in our profile). Thank you! Great Blue Trading Team
NASDAQ:AMDEducation
by GreatBlueTrades
HOW-TO: FibDev Indicator and the Newest UpdatesWe previously published a HOW-TO on using this indicator, but since then the UI and the automated signals have changed noticeably. We STRONGLY recommend reading the first HOW-TO for this indicator as the core concepts are still the same (outside of the signals). UI Updates: We now hide the supply or demand zones if they aren't applicable to the current price action. If the price is in the neutral zone, there is no current target zone so both supply and demand are hidden. If price has broken out to the upside, we display the target supply zones at this time and vice versa for the downside, we display the demand zones. The way these zones are calculated is still the same, they are built using daily values and do not change through out the day (regardless of if/when they are displayed on the chart). Automated Signals: This is the biggest change, we are no longer generating automated signals based on possible reversal points of oversold and overbought price areas. This strategy can still be used, but there will be no signals created is all. Instead, the signals are now generated when the price leaves the neutral zone and track momentum vs searching for trend reversals as before. When the price breaks through the neutral zone to the upside a Bullish Break Over signal is now printed implying that we see bullish momentum to the upside. The supply zones will display and now we are tracking the upside move with the indicator. The opposite for the downside break, Bearish Break Under signal and demand zones displayed for tracking the momentum to the downside. Conclusion: The indicator is now tracking momentum vs reversals, but using a combination of the Intraday Clouds and Neutral/Supply/Demand zones you can still use this for reversal setups. Thank you! Great Blue Trading Team
AMEX:SPYEducation
by GreatBlueTrades
Weber's Law and Fibonacci Numbers: An Exploratory EssayI use Fibonacci numbers rather frequently. In fact, the Fib retracement tool is the first thing I reach for when I start on a new chart. However, explanations for how Fibonacci numbers work have always sound woolly and mystical to me. They work because "man is subject to rhythmical procedure", because there is a Golden Ratio that is hidden behind all things, because Cthulhu says so? However, when we take a close hard look at reality, and actually whip out a ruler and measure things, we find that the Fibonacci sequence is *not* found as-is throughout reality. What we do find are *approximations*. However, this is to be expected for approximations of subjects where the rate of growth is proportional to the current size. And this is to be expected because of Weber's Law. Weber’s law is a psychological law quantifying the perception of change in a given stimulus. The law states that the change in a stimulus that will be just noticeable is a constant ratio of the original stimulus. It has been shown not to hold for extremes of stimulation. And since I will be referencing Mike Cohn's excellent essay (1), I might as well quote his explanation of how Weber's Law apply to Fibonacci numbers: "Imagine instead being handed a 20kg weight and a 21kg weight. They are the same one kg difference as the one and two kg weights. But you would have a much harder time identifying the heavier of the two weights. The difference from one to two kilograms is 100%. You can probably distinguish the weight of items that differ by 100%. The difference between 20 and 21kg, however, is only 5%. You probably can’t tell the difference. (I know I can’t.) And if you could, it would mean you should be able to distinguish between a 1.00 kg weight and a 1.05 kg weight, as that would also be 5%. The values in the Fibonacci sequence work well because they roughly correspond to Weber’s Law. After the two (which is 100% bigger than one), each number is about 60% larger than the preceding value. According to Weber’s Law, if we can distinguish a 60% difference in effort between two estimates, we can distinguish that same percentage difference between other estimates. So, the Fibonacci values work well because they increase by about the same proportion each time." So, given that how we think is affected by how we perceive (2), if Weber's Law applies, the Fibonacci retracement tool works for some of us because it allows us to focus our *imagination by visualising discernible and distinct possibilities within a limited range*. This is why the common criticisms of TA, including Fibs, are valid: 1) it is an uncertain business; 2) one cannot consistently identify where levels should be placed and forecasts are prone to revision; 3) its narrative story-telling power may be stronger than its forecasting power; and 4) levels cannot be verified till they have been tested (ie passed). Let's be humble and accept the general validity of these criticisms; for if TA can be an exact science, let he produce an algorithm which could make anyone rich! That being said, if Weber's Law apply thusly, it simply reaffirms what experience traders often exhort: that it is hard for algorithms to replace (3) the imagination and instincts of an experienced trader! Having said that, if Weber's Law apply thusly, we ought to 1) pay attention to how other industries, eg Mike Cohn's, have adapted Fibonacci numbers to great success and ask ourselves if our approach to Fibs can be adapted accordingly; and 2) maybe more importantly, reconsider our values, assumptions, beliefs and expectations of those tools we use that are based on Fibs. (1) www.mountaingoatsoftware.com (2) www.frontiersin.org (3) "Replace", not "aid".
INDEX:BTCUSDEducation
by AlphaBravoCharlie77
14
A Comprehensive Guide to Fibonacci RetracementsHello traders, in this post, we will be going over one of the most commonly used tools in the equities (stocks), forex (fx), and cryptocurrency markets - the "Fibonacci Retracement". For a better viewing experience, please view this on your desktop/PC, as the mobile and tablet versions of the charts are harder to read. Although I have briefly touched on how to use the Fibonacci Retracement tool in my previous Elliott Waves series, we are now going to go over it in depth, and talk about how this tool can help you find entries and exits within an existing trend, which also helps identify whether you are in a bullish or bearish trend. The Fibonacci Retracement tool, although widely used by many traders, is almost always not correctly used by new traders. Most traders will often connect the wrong points, indicating the wrong Fibonacci retracement levels. Here, I will be explaining the proper way to use the Fibonacci Retracement tool in a very simple translated friendly guide in one guide. ------- What Is the Fibonacci Retracement? Fibonacci Retracements (Fib(s) for short), are a set of 'ratios', defined by mathematically important Fibonacci sequence. This allows traders to identify key levels of support and resistances for price action. Unlike other indicators, Fibonacci retracements are FIXED, making them very easy to interpret. When combined with additional indicators, Fibs can be used to identify potential entry and exit points with high probability to trade on trending movements. Fibonacci retracements are used to indicate levels of support and resistance for a stock’s price. Although they are similar to moving averages in this respect, Fibonacci retracements are set by the extent of the previous bullish or bearish run and do not change each day in the current trend as moving averages do. Therefore, it can be significantly easier to identify and anticipate support and resistance levels from Fibonacci sequences. How Is the Fibonacci Retracement Calculated? (You don't need to calculate it yourself - It's already done for you!) Fibonacci retracements are based on what is known as the 'Fibonacci sequence', where each number in the sequence can be added to the previous number to produce the following number within the sequence. Now, you might be confused here, but don't! - I am just explaining the concept on how it's calculated. You do not need to personally calculate the actual sequence of the Fibonacci Retracement, as everything is already pre-determined and calculated within the tool itself on TradingView. To put it simply, dividing any number in the sequence by the following number yields 1.6180 – known as the "Golden Ratio" – while dividing any number by its predecessor yields 0.6180. Dividing any number in the sequence by two positions in advance yields 0.3820, while dividing any number by a number three positions in advance yields 0.2360. These ratios emanating from the Fibonacci sequence are found throughout nature, mathematics, and architecture - such as flowers, buildings, and so forth. Yes, if you search for Fibonacci sequence examples, you can find these within daily uses, not only in trading. Now, let's get into the meat and potatoes. Retracement levels for a stock/cryptocurrency are drawn based on the prior bearish or bullish movement. Don't forget this - you need to know whether you are in a bullish or bearish trend. Is the stock or coin going up? or down? To plot the retracements, draw a trendline from the low to the high (also known as the swing low to the swing high) within a continuous price movement trend – Fibonacci retracement lines should be placed at 61.80%, 38.20%, and 23.60% of the height of the line. Again, these numbers are already calculated for you within the tool itself. In a bullish trend, the retracement lines start from the top of the movement (i.e. the 23.60% line is closest to the top of the movement), whereas in a bearish movement the retracements are calculated from the bottom of the movement (i.e. the 23.60% line is closest to the bottom of the movement). How to Trade Using the Fibonacci Retracement Once you have drawn a set of Fibonacci retracements on a chart of your liking, it is possible to anticipate potential reversal points where support or resistance will be encountered. If the retracements are based on a bullish trend, the retracements should indicate potential support levels where a downtrend will reverse bullishly. So to put it simply, the pre-determined Fibonacci levels, should in theory and practicality, act as resistance. If not, there is almost 100% certainty, even if the support/resistance is not held, there will always be some form of price reaction at each Fibonacci level just based on the Market Psychology movements. If the retracements are based on a bearish movement, the retracements should indicate potential resistance levels where a rebound will be reversed bearishly, which is the vice-versa situation for the bullish movement trend. The most common reversals based on Fibonacci retracements occur at the 38.20%, 50%, and 61.80% levels (50% comes not from the Fibonacci sequence, but from the theory that on average stocks retrace half of their prior movements). Although retracements do occur at the 23.60% line, these are less frequent and require close attention since they occur relatively quickly after the start of a reversal. In general, retracement lines can be considered stronger support and resistance levels when they coincide with the overall trend, meaning, that if you know that you are in an established bullish or bearish trend, you will most certainly get some form of reaction at the most common reversal levels within the Fibonacci level, which is shown in the image below. Whenever applying Fibonacci retracements, keep in mind that retracement lines represent only potential support and resistance levels, they are NOT 100% set in stone – they represent price levels at which to be alert, rather than hard buy and sell signals; however, they have HIGH PROBABILITY. It is important to use additional indicators, in particular MACD, to identify when support or resistance is actually being encountered and a reversal is likely. The more that additional indicators are pointing towards a reversal, the more likely one is to occur. Also note that failed reversals, especially at the 38.20% and 50% retracement levels, are common.
BITSTAMP:BTCUSDEducation
by XForceGlobal
76
Retracements and Expectations👨‍🏫 A students ask me to clarify a strategy I use when momentum trading using retracements in something I call the "Springboard Effect" The theory is, the deeper the retracement after the initial impulse move the less chance of an extension or "strength" of the continuation. I like to use the analogy of a Spring Board, (or diving board) and the stiffness of the board or the amount of "spring" it has 👇 🤔 Imagine we we have 4 different boards, all with a different amount of springs and we are going to drop the same amount of weight ⚖️ from the same height onto each board. When we drop the weight onto the board that has lots of springs, it wont retract far before launching the weight high 🚀 If we drop the weight on a board that has a less springs it will retract further, but have less strength to launch the weight very high 🛫 If we drop the weight onto a board that has barely any springs then it will retract a lot and then struggle to even launch the weight higher than the height it was dropped from 😤 In this analogy..... The height we dropped the weight from, is the top of the impulse move 📈 The different boards are the different fib retracement levels 🧮 The springs are the buyers at those levels 💵 How far it throws the weight is the strength or price action of the extension 💪 👉 A Bounce on the 382 tells us that there are plenty of buyers wanting to enter this market asap, this is a good sign that the extension could be strong. I like to target the 1.618 extension and or match it up to a level of resistance close by 👉 A bounce on the 50 tells me there is still a lot of bullish momentum but buyers where happy to buy it much lower, I'll still consider this bullish and target the 1.272 extension and match it up with some resistance close by or front run the level if I have to. 👉 A bounce on the 618 I dont really consider to be a strong move, I feel we will get a good bounce and may extend further, but I play close attention to the previous high incase we double top. I will look for things like candle stick reactions and use the CCI to spot divergence if momentum is lacking. 👉 A bounce on the 782 I consider a failure of the trend, I will expect buyers to still step in, but it will be a weak bounce and only really look to target other fib levels inside the retracement as potential resistance and this trade becomes more of a short term scalp. I hope this makes sense and adds some value to your trading, peace ✌️
OANDA:SPX500USDEducation
by DeNomics
9
Popular Trading Indicators (Simply) ExplainedEvery full-time trader knows that rule number 1 in this business isn't to make money; rule number 1 is: don't lose money. Hence, any successful, long term trading strategy must inherently focus on managing risk. I know that lately the word risk carries next to no meaning, and that's because the more risk you take, the more you're rewarded, while those who manage their risk, and are potentilly risk averse in general, pay the price (in purchasing power terms). Having said that, in this context, trading with risk in mind is critical to following rule number 1, and it's essential to managing your risk exposure, and creating a sustainable, successful trading strategy. Moving averages (MA): Sifting through dozens of mathematical functions to help understand, and predict price action can be very challenging. But, having an understanding of why we use certain indicators is a great place to start. Let's begin by talking about MAs. The name is self-explanitory, of course, and it's not much more complicated than that. When we're looking at a MA, what we're seeing is an average of the price over a specified period of time. Now, you could say that using a 20 day simple MA is better than using a 21 day exponential MA (which places more emphasis on recent PA). But, this is a moot conversation, because we don't actually know what they mean until we explore what the MAs reveal for the timeframe being analyzed. By knowing and focusing on industry standard MAs, we can see what larger institutional desks might be seeing, and those MAs include the 20 day MA (20DMA), 50 day MA (50DMA), 100 day MA (100DMA), and the 200 day MA (200DMA). When we apply these MAs across multiple timeframes to derive a thesis on price action, it all starts to make sense, and you can see these industry benchmarks being respected on the longer time frames, clearly. However, when you look at price action post 2008, it's almost as if the intraday MAs are seemingly ignored completely. The HFT EFT flows are so heavy and they distort price so drastically, imo it's a losing battle trying to day trade based on intraday MAs. Relative Strength Index (RSI): The relative strength index (RSI) is a great momentum indicator used to gauge whether or not a financial instrument is overbought or oversold. It's analyzed as a line graph with a range of 0 to 1, the latter being the top of the range, with overbought conditions identified at a value of greater than 0.70, and oversold conditions being observed with a value of 0.30 or lower. These polar extremes often indicate that a reversal is about to occur. Fibonacci Retracement (Fib): The Fib is a very popular and is used to gauge the magnitude of a price retracement. For example, if a stock falls 25%, and then bounces hard on high demand, we could apply a Fib to benchmark the move against previous, similar moves. How the Fib works, is it uses a mathematical formula which adds the previous two number together to get the next. For example, starting at 0, the Fibonacci sequence is as follows: 0, 1, 1, 2, 3, 5, 8, 13, 21, etc.. Within the Fib indicator, there are 5 key levels to watch after you've applied the 0 and 1 ranges to your price move, which includes the 0.236, 0.382, 0.5 (not officially included but useful), the 0.618, and finally the 0.786. Typically, I divide the asset price by the money supply (M2), to find tradable Fib levels (a lot of price distortion currently as I mentioned). Volume: When the price of an underlying security changes, what we're witnessing is the demand and supply (discovery) process. While this does tell us a lot, volume tells us the power of the move, and hence also the weakness of a move. For example, when we're seeing price rise as volume falls, the power of the move is diminishing, therefore it tells us that the move/trend could be nearing exhaustion. Placed together with other indicators that may also be flashing "red" could help us make better, and more informed decisions. In forex, however, volume points to the number of price changes which occured within the specified time interval. This is a bit different than stock or bond price volume, but essentially speaks to the depth of the market as well as the participation rate, just as it's peer does.
AMEX:SPYEducation
by Hedge_Of_The_World
4