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Chapter 10, Part II. Fibonacci Retracement. Page 2

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 15, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Upward thrust

    As we’ve noted in previous part of current chapter, to calculate retracement we have to estimate swing high and swing low – i.e. the highest point of the thrust and the lowest point of the thrust.

    Pipruit: X and A points, in other words…​

    Commander in Pips: Right. Since, an up thrust develops from lower levels to higher levels, then the starting of the thrust, which is our “X” point” will be the swing low. And “A” point will be the swing high…

    Pipruit: … because up thrust ends at higher levels, which is also a final point of thrust​

    Commander in Pips: Absolutely. So, remember two important rules:

    1. We use strictly high and low prices for estimating A and X points. Not open, not close not some average – strictly extremes.

    2. During up thrust the “A” point will always be the most recent high price and it has to stand later in time than X point – to the right side from X on the chart.

    Commander in Pips: Ok, mark for me X and A points here:

    [​IMG]

    Pipruit: Ok, let’s see. First I’ll mark an A point, because, as you’ve said – this is always will be the most recent maximum price. And then, X point is easier to see – here it is, the lowest price of the thrust:​

    [​IMG]
    Commander in Pips: Well done, son. I see that you understood this right. Now let’s discuss how to calculate retracement levels.

    1. All retracement levels will be below the A point and stand between the X and A points – i.e. stand inside the “XA” range;

    2. To estimate any retracement level you should apply the formula: A - (A-X)*ratio. For instance, if A=1.3854 and X=1.3710, then 0.382 level = 1.3854-(1.3854-1.3710)*0.382 = 1.3799.

    So, now is your turn - estimate 0.786 level…

    Pipruit: So, 1.3854-(1.3854-1.3710)*0.786 = 1.3741.​

    Commander in Pips: That’s right, so if we will calculate all levels in the same way and then draw them on the chart, we will get the following picture:

    [​IMG]

    Pipruit: Looks great – I see my level there! But Sir, do we have to do it always manually?​
     
    #1 Sive Morten, Dec 15, 2013
    Lasted edited by : Mar 1, 2016
    Hamza Samiullah and fran alvarez like this.
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