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Chapter 10, Part V. Combination of Fibonacci levels with other lines. Page 3

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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    Combination of Fibonacci levels with a Trend line

    All the same is about trend lines. The same rules, market mechanics and others items that we’ve just discussed. The major difference is that trend line has a slope and depending from time, it could coincide with different Fibonacci levels. But let’s see how it looks like on a picture. Tell me, what you see here:

    Chart #3 EUR/USD hourly

    Pipruit: The market is showing a nice move up, although this is not a perfect thrust. Now it has paused and maybe will show retracement down. So, here we can apply Fibonacci retracement levels to enter long. Also I see the trend line that is rather deep from current market action. I do not know if would I wait for deeper retracement or enter from 0.382, for example. But taking into consideration that thrust is not very impressive – the 0.618 or even deeper retracement is probable.​

    Commander in Pips: Nice analysis. Especially I like the last part about strength of thrust and depth of retracement. So, I think that you’ve understand already, that the area of crossing trend line and Fibonacci level is stronger and is safer for a potential buy trade. See what has happened:

    Chart #4 EUR/USD hourly

    Commander in Pips: The market mechanics and explanation of this combination is the same as with ordinary support/resistance levels. As a conclusion, I say that you may combine both horizontal and diagonal lines with Fibonacci retracement and treat their coincidence or crossing as a stronger area.

    Pipruit: And could we use coincidence or all three types of lines?​

    Commander in Pips: Well, if it will happen somewhere – sure we could.

    And very important notification at the end of this part:

    While combination of Fib levels with trend lines and/or with ordinary support/resistance levels attracts more traders’ attention and makes these levels stronger – the same reason makes these levels very sweet for market-makers, who like to trigger orders around them. Take a note, that appearance such patterns as Stop Licking and different kind of failed breakouts around these areas are more probable.

    P.S. This lesson was written by Sive Morten, who has been working for a large European Bank since April of 2000, and is currently a supervisor of the bank's risk assessment department. Sive's knowledge of forex market and banking industry is vast and quite complete. If you have any specific questions about forex, banking industry, or any other financial instruments, please post themon the next page and Sive should answer soon.

    Note: FPA ranks are earned in the battles against scam, not in the classroom.
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