Part X. Fibonacci Summary.
Commander in Pips: This is our final lesson about Fibonacci. Today we will repeat the major terms about it, just to sum up knowledge. But in the beginning I want to note, that if you are really become fascinated with Fibonacci, then I strongly recommend you to read Joe DiNapoli’s book “Trading with DiNapoli levels”. This book teaches advanced techniques of applying Fibonacci tools – such as retracement as extensions.
1. Fibonacci retracement levels are: 0.236; 0.382; 0.5; 0.618; 0.786; 0.886; 1.0. The major amongst them are 0.382; 0.50 and 0.618.
2. Retracement levels always stand inside the initial market swing;
3. Traders use Fibonacci retracement levels as potential or . The major rules for using retracement are as follows: “Buying deeps or selling rallies”.
- “Buy deeps” rule applies during a market up thrust and means that we should buy from one of the retracement levels. In this case Fibonacci retracement levels act like levels;
- “Sell rallies” rule applies during a market down thrust and means that we should sell from one of retracement levels. In this case Fibonacci retracement levels act like levels.
4. IF you do not have a software that calculates retracement automatically, you can apply the formulas t calculate levels yourself:
- for retracement from Up thrust: Swing high - (Swing high – )*ratio;
- for retracement from Down thrust: Swing low + (Swing high - )*ratio;
5. Although the most time retracement level are used as an area for potential entries into the market, you also may use them as an area to . Specifically, you can use retracement levels of higher time frames as a potential areas to take your profit;
6. Multiple retracement levels from different swings could create Confluence retracement areas. These areas are stronger than just single level and could typically be formed only with 0.382 with 0.618 levels;
7. Major Fibonacci extensions ratios are: 0.618; 1.0; 1.272; 1.618; 2.0; 2.618. But mostly applicable the 0.618; 1.0; 1.272; 1.618. 1.0 extension is very important.
06-21-2011, 06:30 PM #1
Chapter 10, Part X. Fibonacci Summary.
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