Market Overview Me Going Over My Full Robin Trap Strategy In Deep Detail. And What Trades I Will Get Into This Week!
Fibonacci Retracement
Market Overview Part 13Me Going Over My Full Strategy In Deep Detail On The Live Markets And Even Placing Trades In This Video
3 Best Fibonacci Tools For Forex Trading
Hey traders,
In this article, we will discuss 3 classic Fibonacci tools you must know for trading different financial markets.
1️⃣ Fibonacci Retracement
Fib.Retracement is my favorite fib.tool. It is aimed to identify strong horizontal support and resistance levels within the impulse leg .
We draw this tool based on the high and low of the impulse (from wick to wick) and it shows us POTENTIALLY strong structure levels determined by Fibonacci numbers .
Common Fib.Retracement levels are: 0.382, 0.5, 0.618, 0.786 .
Once one of the levels is reached, wait for a confirmation before you open a trading positions.
Above is the example of an application of a fibonacci retracement tool based on a bearish impulse leg on EURUSD.
2️⃣ Fibonacci Extension
Fib.Extension indicates strong horizontal support and resistance levels beyond the impulse . Similar to Fib.Retracement tool, Fib.Extension is drawn relying on impulse's high and low (from wick to wick) and it shows POTENTIALLY strong structure levels where the consequent impulses may complete based on Fibonacci number.
Common Fib.Extension levels are: 1.272, 1.414, 1.618 .
Once one of the levels is reached, wait for a confirmation before you open a trading positions.
Above is the example of fibonacci extension tool based on USDJPY based on a bullish impulse leg.
3️⃣ Fibonacci Channel
Fib.Channel shows strong vertical supports and resistances (trend lines) within the channel . The tool is drawn based on the trend line of a valid parallel channel (based on wicks) and it shows POTENTIALLY strong trend lines from where the market may retrace .
The trend lines within Fib.Channel rest on 0.382, 0.5, 0.618, 0.786 Fib.Levels .
Once one of the levels is reached, wait for a confirmation before you open a trading positions.
Above is the example of a fibonacci channel on USDCHF.
Remember that Fibonacci's are simply tools in a toolbox. In order to use them properly, you need to build a trading system around them, test it and confirm its efficiency.
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!
A Comprehensive Guide to Fibonacci Retracements (Updated)Hello traders, in this post, we will be going over one of the most commonly used tools in all asset classes - the "Fibonacci Retracement" (or Fib for short). 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 with or without the use of the Elliott Wave Theory, 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 post.
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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 0.382, while dividing any number by a number three positions in advance yields 0.236. These ratios originated 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.
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Retracement levels for an asset 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), or vice versa, high to low, within a continuous price movement trend – Fibonacci retracement levels should be placed at 61.80%, 38.20%, and 23.60% of the height of the line for you by the tool itself. 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).
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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 support if in a bullish trend, and resistance in a bearish trend.
There will always be some form of price reaction at each Fibonacci level just based on Market Psychology. 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 vice-versa for the bullish movement trend.
The most common reversals based on Fibonacci retracement levels 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 - so this is considered a 'psychological level'). 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.
How to trade the Fibonacci indicator in 2024Today, we’ll start with what Fibonacci is and how to use it to spot significant market turning points.
Let’s start with...
A short story about Fibonacci
In 13th century Italy, lived a man named Leonardo Pisano – one of the greatest mathematicians of all time.
Leonardo (also known as Fibonacci), learnt all about Arabic and Indian mathematics during his travels in North Africa and around the Mediterranean regions.
Each time he travelled to a new place, he kept noticing a consistent pattern that repeated itself throughout nature.
The sequence he defined was as follows.
0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144…
Basically, all you do is take the last two numbers and add them up to get the next number.
0 + 1 = 1
1 + 1 = 2
1 + 2 = 3
2 + 3 = 5
3 + 5 = 8
8 + 5 = 13
And so on…
Fibonacci first contrived this pattern through a pair of breeding rabbits but he then saw this pattern throughout nature - in the breeding of honeybees , the shape of seashells as well as plants.
This sequence also applies to trading and investing charts and is called the Fibonacci Retracement indicator.
The Fibonacci Retracement indicator is used to help identify possible support and resistance levels for any market.
The idea is all high liquid markets tend to move, to and retrace back, to certain levels after a big price move.
The indicator is used to calculate the ratios and percentages using the Fibonacci sequence.
Let’s look at an example with the South African JSE ALSI 40.
Fibonacci on the JSE ALSI 40
Looking at the above daily chart of the JSE ALSI 40, you can see the index has fallen from a Swing High point of (100%) at 70,522 down to a Swing Low point (0%) to 65,386.
On your platform, when you add the Fibonacci Retracement tool onto your chart, you'll drag it from the swing high to the swing low price of the uptrend to see six main horizontal fib lines present themselves:
Fib line #1: 100% (Swing high)
Fib line #2: 61.8%
Fib line #3: 50%
Fib line #4: 38.2%
Fib line #5: 23.6%
Fib line #6: 0% (Swing low)
Traders use these lines to establish and identify supports (floor) and resistances (ceiling) levels.
And with these levels you’ll be able to spot good entry, stop loss and take profit price levels.
Once you draw the Swing High and Swing Low on the JSE ALSI 40, the Fibonacci lines will be plotted on the chart.
You would also have seen the market then went to one of the high points at 61.80% at 68,560.
The price then retraced back to the 23.6% level at 66,598.
So you can see where we are going with this.
As a reversal trader, you could have sold (gone short) the index around 68,560 and held it until it hit the 66,598 line at 23/6%.
That’s where you would have banked a gain just by waiting for the market to bounce off a fib line.
That’s a good introduction and a different way for you to trade and use the Fibonacci Retracement tool with your trading in 2024.
Let me know if this was helpful!
Mastering Fibonacci Retracement :Navigating Bitcoin's VolatilityMastering Fibonacci Retracement :Navigating Bitcoin's Volatility
Navigating the volatile landscape of Bitcoin trading can be a daunting task for both novice and experienced traders alike. However, equipped with the right tools, traders can identify potential support and resistance levels, make informed decisions, and capitalize on market movements. One such tool that has stood the test of time is the Fibonacci retracement tool, a staple in the arsenal of many traders due to its uncanny ability to forecast potential price reversals with remarkable accuracy.
Understanding Fibonacci Retracement
Fibonacci retracement is based on the idea that markets will retrace a predictable portion of a move, after which they will continue to move in the original direction. The concept draws from the Fibonacci sequence, a series of numbers where each number is the sum of the two preceding ones (0, 1, 1, 2, 3, 5, 8, 13, 21, and so on). In trading, these numbers are translated into percentage levels that traders use to identify potential reversal points on price charts.
Key Levels to Watch
The most commonly used Fibonacci retracement levels are 23.6%, 38.2%, 50%, 61.8%, and 78.6%. These percentages represent potential support and resistance levels where the price of an asset like Bitcoin could experience a reversal or consolidation. The 61.8% level, often referred to as the "golden ratio," is particularly noteworthy for its reliability in predicting price movements.
Applying Fibonacci to Bitcoin Trading
When applying Fibonacci retracement levels to Bitcoin's price action, traders often look for significant highs and lows to place their retracement lines. From there, the tool provides a visual representation of potential areas where the price may stall or reverse. For instance, during a downtrend, a retracement to a higher Fibonacci level like 61.8% could indicate a potential area of resistance where traders might consider taking profits or entering short positions.
The Significance of the 78.6% Level
Recent discussions among traders have highlighted the 78.6% retracement level as a crucial point for Bitcoin, suggesting that reaching this level often precedes significant corrections. This phenomenon underscores the importance of Fibonacci levels in anticipating market movements, allowing traders to adjust their strategies accordingly.
Real-world Application
Consider Bitcoin's historic rally and subsequent corrections. Traders have observed that significant pullbacks often align with key Fibonacci levels. For example, during a bullish phase, if Bitcoin's price retraces to the 61.8% or 78.6% levels before bouncing back, this could be seen as a strong signal for trend continuation.
Conclusion
The Fibonacci retracement tool is more than just a mathematical curiosity; it's a reflection of human psychology and market sentiment. By identifying levels where price action may change direction, traders can make more informed decisions, manage risk more effectively, and potentially increase their chances of success in the market.
As with any trading tool, it's important to use Fibonacci retracements in conjunction with other indicators and analysis methods to validate potential trading signals. Remember, no tool can predict market movements with absolute certainty, but by understanding the tendencies and patterns, traders can navigate the Bitcoin market with greater confidence. BINANCE:BTCUSDT BITSTAMP:BTCUSD BINANCE:BTCUSDT.P
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of Fibonacci RetracementsIn this article, we delve into the intricacies of the Springboard Effect of Fibonacci Retracements , drawing parallels between the trading world and the physics of a springboard.
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The Springboard Analogy:
Imagine a scenario with four different springboards, each with varying degrees of stiffness. Now, drop an identical weight from the same height onto each board. The resulting bounce illustrates the concept of retracement and extension in the context of momentum trading.
Barely Any Springs (0.236 Retracement):
A bounce at the 0.236 retracement level is seen as a potential trend failure. Buyers may step in, but the bounce is likely weak. Traders shift focus to shorter-term scalping opportunities, targeting other fib levels within the retracement as potential resistance.
Few Springs (0.328 Retracement):
Here, the bounce on the 0.328% retracement is viewed with caution. While a good bounce may occur, traders remain vigilant about a potential double top, closely monitoring candlestick reactions and utilizing the CCI to identify divergence if momentum falters.
Moderate Springs (0.5 Retracement):
A bounce at the 0.5 retracement level signifies continued bullish momentum. Buyers are willing to enter at a relatively lower point, maintaining optimism. Targeting the 1.272 extension, traders consider this a bullish signal. Aligning with nearby resistance or front-running the level becomes a strategic move.
Lots of Springs (0.618 Retracement):
This scenario represents a strong market extension. A bounce at the 38.2% retracement level indicates a plethora of buyers eager to enter the market promptly. This serves as a positive sign, suggesting a robust extension. The target? The 1.618 extension, potentially aligned with a nearby resistance level.
The Springboard Effect provides traders with a tangible framework for interpreting retracements and anticipating market extensions. By aligning retracement levels with the stiffness of a springboard, traders gain insights into the potential strength or weakness of a continuation. Whether aiming for robust extensions or preparing for short-term scalps, understanding the nuances of the Springboard Effect adds value to a trader's toolkit.
Embrace this strategy, and may your trades be propelled to new heights.
Fibonacci Retracement StrategiesFibonacci retracements are a cornerstone in the toolkit of many traders, offering a mathematical approach to identifying potential areas where reversals may occur. This article delves into the intricacies of using Fibonacci retracements, covering everything from basic understanding to strategies involving other indicators. Read on to gain insights into how to effectively incorporate these levels into your trading strategy.
What Are Fibonacci Retracements?
Fibonacci retracements are a popular technical analysis tool used to identify potential support and resistance levels on a chart. Developed around the concept of the Fibonacci sequence—a series of numbers where each number is the sum of the two preceding ones—the Fibonacci indicator applies this mathematical formula to financial markets.
Key retracement levels are often considered at 38.2%, 50%, and 61.8% of a price move. The 61.8% level, in particular, is frequently referred to as the Fibonacci retracement golden ratio, owing to its significance in both nature and financial markets. Traders commonly use these areas to anticipate where the price may reverse, thus providing strategic entry and exit points.
Fibonacci Retracements: How to Use Them
Using the Fibonacci tool for trading begins with identifying a significant swing, either an uptrend or a downtrend, on the chart. The tool is then applied at the swing low and swing high of the price movement. In an uptrend, it starts at the swing low and ends at the swing high; in a downtrend, it's the opposite. This action plots horizontal lines at the key Fibonacci levels, providing potential areas where price could reverse.
Concerning the Fibonacci retracement time frame, it's essential to know that this tool can be applied across various time frames—from one-minute charts to monthly charts. However, the reliability of the retracement levels often increases on higher time frames. That means those plotted on daily or weekly charts generally offer stronger support or resistance compared to those on shorter time frames.
Strategies Using Fibonacci Retracements
In trading, combining Fibonacci retracements with other technical indicators can significantly enhance decision-making. Below are three distinct strategies that utilise these retracements in conjunction with other tools to identify high-probability trade setups.
To see how they work, consider following along in FXOpen’s free TickTrader platform. There, you’ll gain access to over 1,200 trading tools—including the ones featured in this article.
Fibonacci Retracement with Moving Average Crossover
In this Fibonacci trading strategy, traders combine Fibonacci retracements with two Exponential Moving Averages (EMAs) set to 9 and 12 periods to pinpoint entry and exit points. After identifying a trend, either bullish or bearish, they apply the retracement tool to gauge potential reversal zones. Specifically, the focus is on the 38.2%, 50%, and 61.8% retracement levels. If the price reacts at any of these zones—potentially confirmed by a bullish or bearish candlestick pattern—the next step is to observe the EMA indicators.
Entry
Traders often watch for a moving average crossover in the direction of the existing trend as an indication of potential entry.
Stop Loss
Stop losses may be placed above or below the nearest swing high or low. Alternatively, some opt for setting it beyond the next level, including 23.6% or 78.6%.
Take Profit
Profits are typically taken at the high or low of the retracement zone where the price initially reacted.
Fibonacci Retracement with Stochastic Oscillator
In this Fibonacci retracement strategy, the initial setup is similar to the one involving moving averages: traders identify a prevailing trend and apply Fibonacci retracements to find possible reversal zones at 38.2%, 50%, and 61.8%. The twist here is the use of the Stochastic Oscillator, a momentum indicator that ranges between 0 and 100. The oscillator helps identify overbought or oversold conditions when the price reaches these areas.
Entry
Traders generally look for the Stochastic Oscillator to exceed 80 (overbought) or drop below 20 (oversold) when the price reaches one of these Fibonacci zones. The entry signal often comes when the oscillator crosses back below 80 or above 20 after a reaction.
Stop Loss
Stop losses can be situated either above or below the closest swing high or swing low. Some traders may also choose to place it beyond an adjacent level, such as 23.6% or 78.6%.
Take Profit
Take profits are commonly located at the level where the price first exhibited a reaction, be it a high or a low.
50% Fibonacci Retracement Strategy
The 50% Fibonacci retracement strategy is a lower risk-to-reward approach but one that’s simple. Unlike other strategies that utilise multiple Fibonacci levels or additional indicators, this method zeroes in on the 50% mark as the focal point for entry, making it straightforward for traders. The 50% point specifically plays into the idea of mean reversion, which states that the price is likely to return to its average over time; however, traders can choose 38.2% or 61.8% areas if preferred.
Entry
Traders typically look to enter a position when the price reaches and reacts from the 50% retracement level, aiming to ride an existing trend.
Stop Loss
Due to the wider scope of this strategy, stop losses are usually set beyond the high or low of the entire Fibonacci retracement, offering a buffer against potential volatility.
Take Profit
Traders often opt to take profits at key support or resistance areas that offer at least a 2:1 reward-to-risk ratio. Alternatively, one may choose to forgo setting a take profit and instead trail a stop loss above or below new swing points that develop.
The Bottom Line
In summary, understanding and applying Fibonacci retracements can enhance your trading strategies, especially when used in conjunction with other technical indicators. These retracement levels offer high-probability zones where price might reverse, creating potential entry and exit points. If you're looking to implement a Fibonacci forex strategy in a secure, low-cost trading environment, consider opening an FXOpen account to access over 50 currency pairs and a comprehensive range of trading resources.
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Fibonacci Retracement/Extensions- How & Why? | Live ExampleFibonacci retracements in technical analysis of various assets use a mathematical sequence discovered by Italian mathematician Leonardo Fibonacci. This sequence is a series of numbers where each number is the sum of the two preceding ones: 0, 1, 1, 2, 3, 5, 8, 13, 21, and so on. In stock trading, Fibonacci retracements are used to identify potential levels of support or resistance during price corrections.
Imagine you have a stock that has been rising in price for some time. Suddenly, it starts to decline. Traders who use Fibonacci retracements believe that during this downward movement, the stock price will likely retrace or bounce back to certain levels before continuing its downward trend.
These retracement levels are derived from the Fibonacci sequence. The most commonly used levels are 38.2%, 50%, and 61.8%. For example, if a stock's price drops from 100 to 80, traders would expect it to bounce back to around 88.20 (38.2% retracement), 90 (50% retracement), or 93.20 (61.8% retracement) before continuing its decline.
While their effectiveness is debated just like any other tool, many traders including myself believe that these levels act as psychological support or resistance points due to the large number of market participants who follow this approach.
Let us get back on the example above.
I drew a trendline which had helped me back in 2021 to predict the top in GOLD. This is the perfect example of how EVERY PRICE movement matters. The Fibonacci levels are derived from levels from 2008. In this example the Fibonacci extension level 3.618 held as a perfect resistance for the price of GOLD.
2008 to 2023, isn't this amazing? How long can a single price movement can have its affect!
How to draw a Fibonacci Retracement/Extension?
It's fairly simple. Just plot one end of the fib to the high of the price movement and the other to the low or vice versa.
I'll answering all your queries in the comments below. Please feel free to reach out!
Advanced Bull Flag ConceptsHave you ever wondered why price action sometimes forms a bull flag pattern?
Have you ever wondered if there is a way to predict whether a bull flag will break out before it actually does so?
In this post, I will try to address these questions by presenting a couple of theories about the nature of bull flags.
Bull Flag Theories
(1) The flag structure of a bull flag tends to form along Fibonacci levels, with the ideal flag proportion being an approximated golden ratio to the flagpole; and
(2) Fibonacci and regression analyses can provide useful insight into whether price will successfully break out of its bull flag pattern, sometimes long before price even attempts to do so.
I will try my best to clearly explain both theories in detail below.
Note: Although this analysis is also generally true for bull pennants, bear flags, and bear pennants, to keep things simple I will focus solely on bull flags. Additionally, this analysis is generally true across timeframes.
Part I - The Basics of a Bull Flag
First, let's begin with the basics. As shown in the image below, bull flags form when an asset is in a strong uptrend. The uptrend forms the flagpole of the bull flag structure.
The flag structure forms when price consolidates, usually in a falling trend. This consolidation phase is often characterized by price oscillators rotating back down while the price retraces only a small part of its prior upward move.
From a market psychology perspective, bull flags often form when most market participants who bought the asset continue to hold it expecting the uptrend to resume, while only a minority of market participants sell (or short the asset) as its price corrects downward. The bull flag pattern is a continuation pattern because it reflects the market's general expectation that price will eventually resume its upward move.
Once the price definitively breaks above the upper channel of the flag (often with strong momentum and high volume), the bull flag pattern is validated. Upon breakout, the expected move up is equal to the vertical height of the flagpole.
Part II - The flag structure of a bull flag tends to form along Fibonacci levels, with the ideal flag proportion being an approximated golden ratio to the flagpole
Here's where things begin to get interesting. Below is the golden ratio.
Two quantities, a and b (where a > b ), form the golden ratio if their ratio is the same as the ratio of their sum to the larger of the two quantities. (See the equation below)
The equation above shows the Greek letter phi which denotes the golden ratio. Phi is equivalent to a/b when such ratio is also equivalent to (a + b)/a.
Although bull flags can take various forms, it is my hypothesis, based on chart analysis and research, that the most perfectly structured bull flags (ones that also have the highest probability of successful breakouts) occur when the flag forms a golden ratio to the flagpole.
Mathematically, this means that the vertical height of the flagpole is equivalent to (a + b) and the vertical height (i.e. the width) of the flag is equivalent to b. This is also to say that price retraces down to the 0.382 Fibonacci level as measured by applying Fibonacci retracement levels along the flagpole (or to the 0.618 point on the vertical height of the flagpole if one measures from the bottom to top).
I realize that this can be quite confusing, so let’s walk through some visualizations.
Let's first visualize this hypothesis using the golden rectangle. Below is an image of the golden rectangle. A golden rectangle is composed of a square (with sides equal to a) and a smaller golden rectangle (with width equal to b and length equal to a).
Now let's rotate the golden rectangle to better visualize the hypothesized flag pattern.
The bull flag is hypothetically an approximation of the golden rectangle, whereby the width of the flag is in a golden ratio approximation to the length of the flagpole.
In the illustration below, there are multiple bull flags contained within a Fibonacci spiral. The spiral is made up of golden rectangles, with each larger golden rectangle containing a smaller golden rectangle inside it. The smaller golden rectangle is the flag structure, and the length of the larger golden rectangle is the flagpole.
One can think of the Fibonacci spiral and the golden rectangles as a series of bull flags that build on top of each other in a repeating pattern. In this diagram, price is represented by the increasing length of the sides of each golden rectangle. In other words, the price on a chart can be seen as spiraling higher after each bull flag breakout.
Of course, not all bull flags form a structure that approximates the golden ratio, but it is my belief that in forming a bull flag, price action is aspiring to achieve as close of a golden ratio approximation as it can. I believe that the bull flags that best approximate the golden ratio structure also present the highest probability for a successful break out.
To learn more about Fibonacci spirals, including the golden spiral that Fibonacci spirals approximate, you can check out this Wikipedia article: en.wikipedia.org
Part III - Fibonacci and regression analyses can provide useful insight into whether price will successfully break out of its bull flag pattern, sometimes long before price even attempts to do so.
To see how Fibonacci levels and regression analysis can give insight into whether a bull flag will break out or break down before it does so, let's consider an example.
Let’s consider the massive bull flag that the iShares Russell 2000 ETF (IWM) formed in 2021.
In 2021, the monthly chart of IWM formed what appeared to be a bull flag, as shown below.
Now let's see why Fibonacci analysis and regression analysis were warning that this bull flag was not likely to break out successfully.
First, IWM's price did not retrace to a Fibonacci level before attempting a breakout (when using the pole as the Fibonacci retracement reference point). In the chart below, we see that price tried to break out, without even so much as retracing down to the highest Fibonacci retracement level: $196.71. By not undergoing Fibonacci retracement, price did not give its oscillators the opportunity to rotate back down fully. Instead, price remained overextended at the time it attempted to break out.
Now let's look at regression analysis. Below is a log-linear regression channel that contains IWM's entire price history. As noted in my prior posts, a regression channel simply indicates how far above or below the mean (or average) price an asset's current price is trading. In the regression channel above, the red line is the mean price, the upper channel line is 2 standard deviations above the mean, and the lower channel line is 2 standard deviations below the mean.
A successful breakout of the bull flag would have taken IWM's price way above its regression channel, to a level that is too many standard deviations above its mean price for us not to question the probability of the breakout’s success. Achieving the full measured move up would have been extremely unlikely, assuming that the regression channel is valid and that price tends to revert back to its mean over time. What was more likely than a breakout was a breakdown, and a reversion back to the mean, which is what ended up happening with IWM.
Another interesting note about IWM’s bull flag is that it presented a false breakout in November 2021. This false breakout was presenting multiple warnings signs including being a UTAD test of a Wyckoff Distribution. As shown below, however, another important clue that the November 2021 breakout would likely fail was that the breakout was not confirmed when comparing IWM to the money supply (M2SL). See the chart below.
One can interpret this chart to mean that in late 2021, IWM’s price was rising because the central bank was increasing the money supply, but not due to improving strength of the underlying companies that comprise the ETF. Using the money supply as a ratio to an asset elucidates the true inherent strength of the asset's value. To understand more about why the money supply can be used in this manner, you can check out my post below.
Part IV - Additional Comments
I have a few additional comments. I usually use Fibonacci levels on a log-scale chart to identify Fibonacci spirals because Fibonacci spirals are logarithmic spirals. However, when using Fibonacci levels based on log scale, the ratios, percentages and numbers, can seem quite confusing because they are logarithmically adjusted. If you choose to replicate my process, please be mindful of this. While using log-scale charts is critical for higher timeframes (e.g. the monthly chart or higher), I have not identified much benefit to using it on shorter timeframes.
In a prior post, I noted that Plug Power (PLUG) is currently forming one of the best-looking log-scale, golden ratio bull flags I have ever seen. If my above hypotheses are true, I would expect to see PLUG move dramatically higher in the years to come. For more information about PLUG, you can read my post linked below. (This is not a solicitation to buy PLUG. Please do your own research and carefully consider all risks.)
At the risk of making this post too long and too dense, I just want to briefly note that it is also my hypothesis, based on observation and research, that the golden ratio is where many S-curve dilemmas are solved. If you don't know what an S-curve dilemma is and you'd like to read about this you can see my post below about Jumping S-Curves .
In short, an S-curve dilemma is another way of conceptualizing the question of whether a bull flag will break out or break down.
I hope that someone finds value in this post. I spent a lot of time studying, researching, analyzing, and cogitating the mathematical nature of price action to reach many of the conclusions here. Thank you for your valuable time in reading my post.
How to Profit from Trend Exhaustion - XAGUSDHow much ... and when? What else is there to know? Enjoy this multi-timeframe tour of the XAGUSD chart to learn how I find MAJOR reversals and targets BEFORE price action reaches them. As always, I strive to produce charts that speak for themselves, and yet this is my video debut here on Tradingview, and I could not be more pleased to narrate this unusual experience. If you enjoy it or, better yet, if you learn from it, then consider this a preview of forthcoming weekday morning livestreams, which I hope you will follow. Until then, be liquid!
Bitcoin's Recent Battle with Fibbonaci🛡️Hey there, crypto enthusiasts! Let's take a closer look at the recent Bitcoin pump that didn't quite take off as expected. It turns out, we encountered a significant resistance level at the 0.5 Fibonacci retracement on the Fibonacci retracement tool. 📊💡
🌐 The Fibonacci Fascination: Before we delve into the recent action, let's touch on the golden tool of technical analysis – the Fibonacci retracement. It's a tool that helps traders identify potential support and resistance levels on a chart based on the Fibonacci sequence.
💰 The Golden Ratio: In this case, we're talking about the golden Fibonacci retracement, the 0.5 level. This level is often seen as a crucial point on the chart. When an asset like Bitcoin retraces to this level, it can act as either strong support or resistance.
📈 The Recent Pump: Bitcoin recently experienced a significant price pump, and many were hopeful that it might lead to a substantial rally. However, the price action encountered resistance right around the 0.5 Fibonacci retracement level.
🛡️ The Battle at 0.5: This level represents a critical point where traders and algorithms make decisions. It can be a make-or-break point for a potential bullish run.
📊 Fibonacci in Action: To use Fibonacci retracement, simply select the tool on your trading platform, and then click on a significant swing low and drag to a swing high. The tool will automatically plot the retracement levels, including the golden 0.5 Fibonacci retracement level.
📚 Fibonacci Tips: When using Fibonacci retracement, keep these tips in mind:
Look for confluence with other technical indicators.
Consider it a tool in your trading toolbox, not a standalone strategy.
Combine it with your overall trading plan and risk management.
Remember, while Fibonacci retracement is a powerful tool, it's not foolproof, and market dynamics can change rapidly. Stay informed, stay adaptable, and keep honing your trading skills. 🔄📈
Magic of Fibonacci Levels ✨In the realm of technical analysis, few tools capture the imagination of traders as effectively as Fibonacci retracements and extensions. Derived from the famous Fibonacci sequence, these levels offer insights into potential price reversals, extensions, and trend continuation points. In this article, we'll delve into the world of Fibonacci levels and explore how to use them to enhance your trading decisions.
Understanding Fibonacci Retracements:
Fibonacci retracement levels are like hidden treasures ✨ along a price trend. These levels, calculated from a swing high to a swing low, create horizontal lines that indicate potential support and resistance levels. The most common retracement levels are 23.6%, 38.2%, 50%, 61.8%, and 78.6%.
How to Use Fibonacci Retracements:
Identify a Trend: 📈📉 Begin by spotting a clear trend, either upward or downward.
Select Swing Points: 🏞️ Locate the pivotal swing high and swing low within the trend.
Plot Fibonacci Levels: 📏 Put those retracement levels on your chart, and watch as they highlight potential support or resistance areas.
The Application:
Support Levels: 💪🛡️ During an uptrend, traders often see retracement levels as potential buying zones.
Resistance Levels: ☔ In a downtrend, these levels can be seen as possible areas to consider short trades.
Understanding Fibonacci Extensions:
Fibonacci extensions act like a crystal ball 🔮 projecting potential price targets or levels where the trend might extend. Extension levels include 161.8%, 261.8%, and 423.6%.
How to Use Fibonacci Extensions:
Identify a Trend: 📈📉 As with retracements, spot a well-defined trend.
Select Swing Points: 🏞️ Determine the significant swing low and swing high within the trend.
Plot Fibonacci Extension Levels: 📏 Add those extension levels to your chart, projecting potential price targets.
Few examples :
The Application:
Projection of Trend Continuation: 🚀 Fibonacci extensions hint at where a trend might continue in its existing direction.
Price Targets: 🎯 Traders often utilize extension levels to pinpoint potential price areas before a reversal might occur.
Conclusion:
Fibonacci retracements and extensions are like wizardry in the trader's toolkit. By grasping these levels and their applications, traders can create more informed strategies for entry, exit, and target levels. Remember, while Fibonacci levels are magical, they work best when combined with other technical indicators and chart patterns. As with any trading strategy, practice, experience, and risk management remain essential. With careful consideration and diligent analysis, Fibonacci levels can sprinkle a touch of enchantment to your trading endeavors. 📊✨
Mastering Elliott Wave: The importance of channelingI wanted to share my thoughts on the significance of using channeling technique in Elliott Wave theory when analyzing charts.
To begin, we draw what we call a "base channel," starting from the beginning of wave 1 and extending it to the end of wave 2. This initial channel provides us with a foundation for analysis.
The following occurrence of an impulsive breakout beyond this channel signals the initiation of wave 3. At this point, we create a new "Acceleration Channel" to track the movement of wave 3. If this newly drawn channel is breached to the downside, it suggests the possibility of a correction for wave 3 underway.
As seen in the picture, the original base channel we drew earlier now acts as a support level for wave 4, accompanied by consolidation around Fibonacci levels. This observation has been witnessed numerous times in the past.
When the corrective channel experiences a breakout with above-average volume, it serves as a signal indicating the completion of wave 4. This event provides an opportunity for us to establish Fibonacci targets for profit-taking.
In this particular example, I have chosen to draw the corrective channel only on the final leg of the ABC correction, enabling us to catch the breakout at an earlier stage. A more conservative approach, however, would involve waiting for the breakout to occur after wave B has been surpassed.
Hope this was helpful for those wanting to learn more about channeling and Elliott Wave.
Market Direction - Trend StrengthThe strength of a trend can be a key factor in predicting future price movements. This post will specifically cover how to identify trends, how to determine trend strength, and how to use it to your advantage when trading the markets.
Characteristics of a Trending Market
To begin, let us understand how to identify a trending market.
A trending market is a market that is either making higher highs followed by higher lows (UPTREND) or lower lows followed by lower highs (DOWNTREND).
What does this typically look like? Let's see:
Uptrend
Downtrend
Now that we understand how to identify uptrends and downtrends, let's delve further and discuss how to use trend strength to your advantage when trading the markets.
Fibonacci Retracement Tool
The Fibonacci retracement tool is used in trending markets to determine how strong the trend is. It uses natural numbers to determine the high-probability price levels that the market will hit and continue in its initial direction. This method will use four Fibonacci levels: 38.2%, 50%, 61.8%, and 78.6%.
One thing to mention is that in a trending market, the chart is made up of two waves: impulsive and retracement. After an impulsive wave, a retracement wave will usually form; after a retracement wave, the impulsive wave will usually form.
The impulsive wave represents the strong momentum of buyers and sellers. The retracement wave shows the weakness of buyers and sellers.
Therefore, we must look at the retracement wave when it comes to deciding the strength of a trend. For example, in an uptrend, the impulsive wave will be bullish; therefore, the retracement wave will be bearish. In a downtrend, the impulsive wave will be bearish; therefore, the retracement wave will be bullish.
The retracement wave shows the strength of the opposite side of the market. For example, if the impulsive wave is bullish, buyers are stronger. Then, in the retracement wave, sellers will try to dominate the buyers.
Therefore, the deeper the retracement goes, the stronger sellers will be than buyers, and the weaker the bullish trend strength will be.
With the Fibonacci retracement tool, there are three scenarios to determine trend strength:
Strong Trend Strength: 38.2% Fibonacci Retracement
Moderate Trend Strength: 50%–61.8% Fibonacci Retracement
Weak Trend Strength: 78.6% Fibonacci Retracement
The above examples show why the Fibonacci retracement tool can be extremely effective in determining not only how strong a trend is, but also how likely it is to continue past the beginning of the impulsive wave.
Bollinger Bands
Bollinger Bands are very effective in reading trend strength. Bollinger Bands are based on price volatility, which means that they expand when the market is trending and there are big prices, and they contract during sideways consolidations when the market ranges.
Bollinger Bands consist of two outer bands (top and bottom bands) on each side and a moving average in the centre between the outer bands (middle band).
One of the main reasons Bollinger Bands are so effective in reading trend strength is that they do not lag as much as other indicators because they always change automatically with the price.
Three important points to note when using Bollinger Bands to read trend strength:
If price pulls away from the outer band and heads towards the middle band as the trend continues, this is a key indication that the trend strength may be weakening.
During strong trends, prices stay close to the outer band and significantly away from the middle band.
Repeated pushes into the outer bands that do not actually reach the band indicate a lack of trend strength.
Let's see a chart example of Bollinger Bands reading trend strength:
As you can see, using Bollinger Bands can provide traders with very useful information about trend strength and the balance between bulls and bears.
Price Rejection
We do not always need indicators or tools to read trend strength; it is possible to do this just by looking at a naked chart. The way rejected continuations or reversals happen on charts can be a huge indicator of being able to read trend strength. Before understanding the price rejection, it is important to know about the wick or shadow of the candlestick.
Upper wick
The upper shadow shows that the price went up and then came down again. This indicates that buyers wanted to increase the price, but sellers dominated the buyers to push the price back down.
Lower wick
The lower shadow represents that the price went down and then came back up. This indicates that sellers wanted to lower the price, but buyers dominated the sellers to push the price back up.
Identifying price rejection
Traders should first wait for the price to reach a strong support or resistance level. Then, at the support or resistance level, candlesticks will likely make wicks opposite the trend due to the strength of the level. For example, wicks or shadows will form on the upper side at the resistance zone, while at the support zone, wicks or shadows will form on the lower side of the candlesticks.
These wicks or shadows are identified as price rejections in the market.
Price rejections are very important, especially in identifying trend strength, because they accept or reject the identification of key levels in the market. For example, if you are unsure whether a support zone will hold or break, you can see whether price rejection will occur at that level.
Let's see a chart example of price rejection and how you can use it to identify trend strength:
The chart above is proof alone that trend strength can be identified by just looking at the price action of a chart.
Understanding the strength of a trend does not have to be complex. Trend strength can be identified simply by using the three different techniques we have covered in this educational post.
The best thing we can all do as traders is to be simplistic and not overcomplicate things; this becomes especially easier when you accept that nothing in the market is certain.
Each market has its own unique market conditions and will not trade rationally all of the time. Therefore, when a trade does not go your way even though your trend strength signals were high and you followed the market, understand that it is just one trade and that the market is completely neutral. It is neither personally on your side nor personally against you.
Trade safely and responsibly.
BluetonaFX
HOW TO: Lesson 1 - Be an an Artist - Video SeriesLesson 1: Be an Artist explains the following topics:
Timeframe Significance
Price Location Significance
Drawing Support / Resistance
Drawing Fibonacci Retracement – Significant Levels
Trading the Extension PullbackThe key is to count the waves correctly. Once we have an extension, we can use the Fibonacci tool to validate and set our entry traps.
Enjoy.
What Is Swing Trading?Are you looking for a way to take advantage of short-term market movements without the stress of day trading? Look no further than swing trading. In this article, we’ll dive deep into the world of swing trading, exploring how it differs from day trading, discussing its advantages and disadvantages, and taking a look at some of the most popular swing trading tools and indicators.
The Basics of Swing Trading
Swing trading involves holding a position for a short to medium period of time - usually a couple of days to a few weeks - with the aim of profiting from the “swings” in the market. A swing trader’s definition is simple: swing traders are those who typically enter and exit at significant support and resistance levels, hoping to capture the bulk of an expected move and take profits at potential reversal points in the market.
The swings are marked with numbers in the chart below.
These traders tend to look at hourly to weekly charts to guide their entries, although the specific timeframe used will depend on the swing trader’s individual style and the asset being traded. It can be used across all asset classes, from stocks and forex to crypto* and commodities. Swing plays in the stock market can be especially effective, as stocks tend to experience plenty of volatility and are subject to frequent news and events that can drive prices to traders’ targets.
Swing traders predominantly use technical analysis to determine their entries and exits, but fundamental analysis can also play a significant role compared to shorter-term styles, like day trading. Fundamental analysis, like comparing the interest rates of two economies, can help to set a swing trader’s directional bias over the course of days or weeks.
Swing Trading vs Day Trading
On the face of it, swing trading and day trading may look similar. After all, both types of traders may look to profit from one key support/resistance level to another. However, there are significant differences between them.
The most distinct difference is the holding period. Day traders aim to close all of their positions by the end of the day and tend to exit a trade within a few hours. It’s rare for swing traders to hold a position for less than a day, although it can happen if their target is met during extreme market volatility. Long-term swing trading can involve holding a position for months - something you won’t see any day trader doing.
This difference in holding period has important implications for risk management. Day trading can be riskier than swing trading, as day traders are exposed to more volatility and are more susceptible to sudden price movements. Swing traders, on the other hand, have more time to react to changes in the market and ignore intraday noise in favour of focusing on their longer-term target.
However, because day traders don’t hold their positions overnight, they also avoid the risk of any adverse events affecting their position while they’re asleep. Swing traders don’t have this luxury.
The frequent in-out nature of day trading means active traders can incur more commission fees than swing traders. Spreads are also less of a concern when swing trading, as wide intraday spreads impact a swing trader’s position less than they impact the position of a day trader.
Finally, the psychological and time pressures are reduced when swing trading. Day trading can be a highly stressful activity, and it requires near-constant attention to the charts. Swing trading can be a much more relaxed approach, avoiding the stresses of intraday price movements and allowing for much less active management.
Swing Trading Advantages and Disadvantages
Swing trading has several advantages that make it a popular choice for many traders. That said, it comes with a few disadvantages traders should be aware of. Let’s consider them.
Advantages
- Lower Time Commitment
One of the biggest benefits for swing traders is the reduced time commitment. Many of us have other things going on that mean we can’t commit several hours a day to trading. Swing trading can be adapted to suit a trader’s individual schedule and may only require a few hours each week to be successful.
- Flexibility
Swing trading is often more flexible than other styles of trading. Not only does it offer time flexibility, but it allows for a wider range of instruments to be traded. For example, you might have trouble performing technical analysis on the 1-minute chart for an illiquid stock, while the 1-hour chart has plenty of price action for you to analyse. In the stock market, swing trading may even be preferred because of the greater number of opportunities it can present.
- Potential Higher Returns Than Long-Term Trading
Because swing traders usually hold positions for a few days to a few weeks, they have the ability to take advantage of shorter-term market movements that might not be reflected in longer-term price trends. For instance, if a stock experiences a temporary dip in price due to a short-term event, swing traders can take advantage of this dip and make a quick profit when the stock rebounds.
Disadvantages
- Less Time to React to Market Changes
What is a swing trader’s biggest disadvantage? The amount of time they have to react to sudden price movements. Short-term traders that are actively managing their positions may be able to stay out of a position entirely until volatility subsides. In contrast, swing traders may not be available to adjust their position if they’re at work or asleep, leading to potentially significant losses.
- Overnight Holding Risks
Part of the issue with holding trades overnight is that they can gap up or down - opening much higher or lower than the previous day’s closing price, which could mean a stop loss isn’t triggered. This can result in large losses beyond what the trader was initially willing to risk.
- Requires Discipline to Hold Trades
Holding a position for several days or weeks can be tough for some traders. Intraday market movements may lead to impulsive decision-making, like closing a trade prematurely or taking a loss because of a perceived change in market direction. To weather these short-term price movements, swing traders must have the discipline to manage their emotions and only check the charts infrequently.
Popular Tools to Use When Swing Trading
A swing trader’s strategy will ultimately depend on their unique system for entering and exiting trades. There’s no right or wrong way to swing trade; the most important aspect is finding an edge over the market and achieving long-term profitability. Here are three common tools and indicators that can be used as part of a swing trading strategy.
Channels
Traders can use channels to take advantage of long-term price trends that play out over days and weeks. To plot a channel, you first need to identify a trending asset that’s moving in a relative zig-zag pattern rather than one with large jumps in price. Swing traders will often use the channel to trade in the direction of the trend; in the example above, they might look to buy when the price tests the lower line and take profit when the price touches the upper line of the channel.
Moving Averages
Moving averages are one of the simplest indicators, but they can help swing traders determine the direction of the trend at-a-glance. The options here are endless:
- You could pair fast and slow moving averages (MAs) and wait for the two to cross; this is known as a moving average crossover. When a shorter MA crosses above a longer one, the price is expected to rise. Conversely, when a shorter MA breaks below a longer one, the price is supposed to decline.
- You could stick with one and observe whether the price is above or below its average to gauge the trend. When the price is above the MA, it’s an uptrend; when it’s below the MA, it’s a downtrend.
- You could use an MA as a support or resistance level, placing a buy order when the price falls to the MA in an uptrend and a sell order when it rises to the MA in a downtrend.
In this equity swing trading example, we’ve applied the Exponential Moving Average (EMA) Cross indicator with a 50 and 200-period length in TickTrader. As you can see, it was valuable for identifying the direction of the S&P 500 over the course of several weeks and could have resulted in a profitable swing call.
Fibonacci Retracements
Lastly, many swing traders look to enter pullbacks in a larger trend. One of the most popular ways to identify optimum entry levels during these pullbacks is with the Fibonacci Retracement tool. Traders typically wait for a shift in price direction, then apply the tool to a swing high and swing low. Then, they enter at a pullback, usually to the 0.5 or 0.618 levels, to profit from the continuation of the trend. As seen above, this strategy can offer ideal entry points for swing traders looking to get in early before a trend continues.
The Bottom Line
In summary, swing trading can be an ideal style for many would-be traders out there. Rather than spending hours in front of the screen each day, swing traders can take a more laid-back approach. However, while solid risk management skills and iron-clad discipline are necessary characteristics for any trader, they’re even more important for swing traders.
Ready to embark on your swing trading journey? You can try a free demo account with us at FXOpen to practise your skills and start building a strategy. Good luck!
*At FXOpen UK and FXOpen AU, Cryptocurrency CFDs are only available for trading by those clients categorised as Professional clients under FCA Rules and Professional clients under ASIC Rules, respectively. They are not available for trading by Retail clients.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
📈 Fibonacci Power in Uptrends📍 What Are Fibonacci Retracement Levels?
Fibonacci retracement levels—stemming from the Fibonacci sequence—are horizontal lines that indicate where support and resistance are likely to occur.
Each level is associated with a percentage. The percentage is how much of a prior move the price has retraced. The Fibonacci retracement levels are 23.6%, 38.2%, 61.8%, and 78.6%. While not officially a Fibonacci ratio, 50% is also used.
The indicator is useful because it can be drawn between any two significant price points, such as a high and a low. The indicator will then create the levels between those two points.
📈 To effectively trade Fibonacci retracements during an uptrend and strategically enter the market during pullbacks, follow these steps:
🔷Identify the uptrend: Determine the presence of a clear upward price movement.
🔷Apply Fibonacci tool: Utilize the Fibonacci retracement tool to identify potential retracement levels within the uptrend.
🔷Focus on pullbacks: Wait for the price to experience a pullback or retracement within the uptrend.
🔷Assess Fibonacci levels: Analyze the price's interaction with key Fibonacci levels, such as the 61.8% or 65% zone, to identify potential support or resistance areas.
🔷Higher highs confirmation: Look for the formation of higher highs after the price touches a Fibonacci level, indicating a continuation of the uptrend.
🔷Entry opportunity: Consider entering the market after a pullback when the price resumes its upward movement, using appropriate risk management strategies.
By combining the power of Fibonacci retracements, recognizing pullbacks in uptrends, and waiting for higher highs, traders can position themselves to capitalize on the potential profit opportunities offered by the market.
👤 @QuantVue
📅 Daily Ideas about market update, psychology & indicators
❤️ If you appreciate our work, please like, comment and follow ❤️
Introducing the Dual Dynamic Fibonacci Retracement IndicatorHey there, Stock Justice here. Today, I walked you through using the Dual Dynamic Fibonacci Retracement Levels Indicator on TradingView. This powerful tool calculates pivot points and determines Fibonacci retracement levels based on your position in the market. I explored every input, from lookback periods to toggling extra levels, to shifting and extending lines. We also delved into the use of two sets of Fibonacci levels to identify areas of confluence for more robust trading decisions. With vivid colors marking each retracement level and the flexibility to modify the lookback period, this indicator is a game-changer for pinpointing support, resistance, potential reversals, and continuations. Remember, the magic is in the details. Happy trading!
From A to D:How to Use the ABCD Pattern to Forecast Market MovesAre you familiar with the ABCD trading pattern?
In this article, I will provide a comprehensive explanation of the ABCD trading pattern, including its characteristics, how to identify it, and how to use it in trading. So, sit back, relax, and enjoy the information provided in this article.
The ABCD ( AB=CD ) pattern , It's a harmonic pattern that is easily recognizable on a price chart and is composed of four points. This pattern follows a specific sequence of market movements that traders can use to predict potential price swings in the future. The ABCD pattern can be applied in various market conditions, including both bullish and bearish markets, and can be used to speculate on the movement of different forex pairs by simultaneously selling one currency and buying another. However, it's important to keep in mind that the ABCD pattern should not be the sole basis for making trading decisions. It should be used as a tool to inform your decisions.
The first step in opening a position using the ABCD pattern is to identify the pattern on a price chart. Multiday charts can provide insight into the behavior of forex markets over an extended period. You can use daily, hourly, or minute-by-minute charts to spot the pattern, but it's crucial to choose a time horizon that aligns with your goals. For instance, traders looking to hold positions for days or weeks may prefer daily charts instead of minute charts.
Once you have selected the appropriate chart type, you can search for the ABCD pattern to identify bullish or bearish signals.
Let's now take a closer look at how the AB=CD pattern forms and how to spot it:
When identifying the ABCD pattern, traders focus on the legs or moves between points. The moves in the direction of the overall trend are denoted as AB and CD, while BC represents the retracement.
Once you think you have identified an ABCD pattern on a price chart, the next step is to use Fibonacci ratios to validate it. This process can also help you pinpoint where the pattern may complete and where to consider opening your position.
The "classic" ABCD pattern follows a specific sequence of market movements, with the following rules:
In a "classic" ABCD pattern, the BC line should ideally be 61.8% or 78.6% of AB. To determine this, traders often use the Fibonacci retracement tool on the initial move from point A to point B. The BC line should end at either the 61.8% or 78.6% Fibonacci retracement level of AB. This helps confirm the validity of the ABCD pattern and gives an idea of where to potentially open a position.
Once the BC leg of the pattern is complete, traders would typically look for the CD leg to reach the 127.2% or 161.8% extension of the BC leg. At this point, traders might consider entering a sell position if the pattern is bearish or a buy position if the pattern is bullish.
The ABCD pattern extension occurs when the CD leg extends beyond the typical 127.2% and reaches 161.8%. This indicates that the price trend may continue in the same direction for a longer period, providing a potentially profitable trading opportunity for traders who have correctly identified the pattern. It's important to note that this extension is not always reliable and should be used in conjunction with other technical analysis tools to confirm the validity of the trade.
Note: In strongly trending markets, the retracement (BC) may not reach the usual 61.8% or 78.6% of AB, but only 38.2% or 50%. It's important to adapt to market conditions and adjust your analysis accordingly.
Moreover:
During the move from A to B, the market should not exceed either A or B.
During the move from B to C, the market should not exceed either B or C.
During the move from C to D, the market should not exceed either C or D.
For a bullish ABCD, point C must be lower than A, and D must be lower than B.
For a bearish ABCD, point C must be higher than A, and D must be higher than B.
To identify an ABCD pattern on your TradingView trading chart, follow these six steps:
1 ) Log in to your TradingView trading account and open a market chart.
2 ) Locate the AB line. Remember that this move should be completely contained within points A and B.
3 ) Locate the BC retracement. This should reach either the 61.8% or 78.6% level of the move from A to B.
4 ) Draw the CD line. Using the AB and BC lines, you should be able to predict where point D will fall. CD will generally be equivalent to AB and either 127.8% or 161.8% of BC in both price and time.
5 ) Keep an eye out for price gaps and wide-ranging bars in the CD leg. These can indicate that an extension is forming, implying that CD may be longer than AB.
6 ) Trade the possible retracement at point D. If you've identified a bearish ABCD pattern, consider opening a sell position. On the other hand, if you've found a bullish one, consider buying.
And here are a couple of examples:
I hope you found this guide on identifying the ABCD pattern useful. Let me know your thoughts in the comments section below, and don't forget to like and follow me if you found this guide helpful.
