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Chapter 10, Part II. Fibonacci Retracement. Page 3

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

    Aug 28, 2009
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    Commander in Pips: Surely not. For this purpose almost any software has so called Fibonacci retracement tool. To draw the levels from up thrust you should accomplish the following procedure:

    1. Click to “X” point of the thrust;

    2. Drag the mouse up to “A” point and release the button. Levels should look like on the picture – the closest to “A” should be 0.382, then 0.5 etc.

    3. If your levels after points 1 and 2 look opposite – the closest to “A” point is 0.886, then 0.786 etc. - some software assumes opposite procedure – you should drag mouse from A to X point. Do this, and you will get proper levels.

    So, let see what has happened with our levels then. Look at the chart #1. This is 60-min EUR/USD chart, by the way…:

    #1 Chart 60-min EUR/USD

    Can you comment this chart somehow? I even made notes, so it’s not so difficult task…

    Pipruit: Ok, as we’ve said, Fibonacci Retracement levels should act like support, if they build from up trust. These levels we can use for entering on long side of the market. First, I see, that 0.382 level was absolutely disrespected by price action – no sign of support. The first level that has supported the market was 0.5. But after some time it also has been broken to the downside. Then, you’ve marked that it has become a resistance – now I see it. Here I can make a conclusion that not only trend lines and support/resistance levels have this feature, but retracement levels also. Then the market reached 0.618 support that has held the price for some time. And finally, market has reached deep 0.786 support, that market was not able to break and then reestablished the up move.

    But, Commander, how we could know, which level will support the market. Where we should buy from?​

    Commander in Pips: You can’t know it only from retracement application. Because the purpose of retracement levels is just to give you possible levels of support ahead of time to watch for, to warn you like a beacon – “Hey, here support is possible!” The quality of these levels is the same as of trend lines or non-Fibonacci support/resistance levels. To get some answer – where market could reestablish up move, you have to combine Fibonacci levels with other tools. How to do that? You will learn in later chapters. But still, a level itself could give you some prompting – you just have to be very attentive to non-obvious details.

    Think, what the fact of total disrespection of 0.382 level tells us?

    Pipruit: … that the market is weaker than it seems?​

    Commander in Pips: Of course, and, hence, that is deeper retracement is more probable. So, if market totally disrespects 0.382 or even 0.5 also, then, the more probable that it will reach 0.786-0.886 levels at least, rather than stop at 0.618 and turn up again. Just be attentive!

    Pipruit: I see. Thanks, Commander, this is very useful information.​
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