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Chapter 10, Part V. Combination of Fibonacci levels with other lines. Page 2

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 16, 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: That’s right. So, let’s see what has happened then:

    Chart #2 EUR/USD Daily

    Pipruit: Cool! The low of the market in this area was just a bit lower than 1.3430.​

    Commander in Pips: Now I think you understand why we should not rely only on some single tool –no matter how strong it is. Fibonacci retracement is powerful and tremendous tool, but Fibonacci plus support/resistance is better.

    Pipruit: Yes, I see it. It looks like how it works in any sports team. The superstar player, no matter how superb he or she is, will not win the game alone in basketball, football or a hockey match.​

    Commander in Pips: You’re absolutely right – nice comparison. Say, let’s assume that market has not held above this area and broke it down. What this possible scenario could tell you?

    Pipruit: Hm. In this case I will be very careful to Buy from other levels, or even will not Buy at all. Because if market has broken the combination of Fib support plus the ordinary support line – in fact it moved below the previous highs – this tells us how weak it is. And the probability is shallow that other Fib levels could hold it, when even a combination was not able to do that.​

    Commander in Pips: Right again! In such cases we should be extra careful to establish any position against the market. And can you explain the market mechanics of this combination. Why is it safer way to enter long?

    Pipruit: This is not too difficult. First of all, many traders after such a strong move up and breakout of previous resistance level will be watching for the possibility to get onboard. But different traders could use different tools – some of them will be watching only at support area, that was a resistance first, others will look at Fibonacci levels. Maybe someone will be watching at both. So, all of them will estimate that this area 1.3430-1.35 is rather strong support and will place their Buy orders there. Hence there will accumulate a double amount of Buy orders – those who want to buy from ordinary support plus those who want to do it from 0.382 Fibonacci support. Because of that, this level will be much more difficult to break through. So, it’s stronger then and to buy from there is safer. The probability that the market will reestablish up move from this area also is greater.​

    Commander in Pips: Good. Also the same combination you can apply in opposite direction. This will be a combination of Fibonacci and ordinary resistance levels.
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