Hello all!
I’m a new user and I’ve started the school (again) 1 month ago.
I’m not new to forex but I’ve not yet try real account (and I don’t want for now).
I’m trying to study Fib retracement, and I’ve found this situation in EUR/USD.
Ther’s a downtrend (checked with EMA on 1D frame) and I want to know if I’ve put Fib. in the right way.
Please check the img!
Thank youuuu
I don’t really use Fibs but is it not from the high to the low? In which case the high would be the 4hr candle that is 2 to the left of where you started your Fibs from.
Hallo baz1982,
thank you for the answer, I didn’t consider the shadow for the swing high.
And concerning the Fib tool, I’ve started it from the Highest point to the lower, as you said, I put it in the wrong way.
Thank you again.
I didn’t even notice before (picture quality is poor) but yeah, it’s drawn from the high to the low. Your image must be vice-versa as its says 100% retracement at the bottom when in fact, that is 0% retracement.
Hello and welcome to Babypips!
What do you hope to use the Fib. tool for? In the chart you showed us, for example, you could draw the Fib. range from low to high, which would make the down-move a retracement of the up-move (and, by the looks of it, that retracement is almost complete)…
If you drew the range from the high to the low, you would then watch/trade the retracement of the down-move…
Hence my question: what sort of trading opportunities are you using the Fib. retracement indicator for?
The EUR/USD is a particularly tricky pair to trade at the moment, so I am not sure how much intra-day movement you may get out of it, and I am assuming that you do not hold trades over weeks or months…
Tell us more…
If you’re in a downtrend and looking to find a retracement to short on, the fib should be placed from the swing high to the swing low. Then you would wait to see how far the price rises to determine whether you have a retracement or reversal. Most fib retracements will be in the 38.2-61.8% zone and if price (generally the real body of the candle and not just the wick) goes into the 70%+ zone, it may indicate a change in the trend or at least weakening of the trend.
Looks like with this one you are assuming that the bottom is where you have placed the bottom of the fib but remember that if you truly are in a downtrend, the next low should be lower than the low in point 1. I would wait to make sure that a lower low is achieved and wait for a retracement to bounce back up and short there. If the lower low is not achieved, the current trend may be weakening, ending altogether, or you may have a reversal. One last thing, sometimes you get really long wicks and it’s unclear what price to use for the swing high/low. I usually use a point about halfway in between the real body and the end of the wick to “average” it out as in point 2. Hope this helps.
Hello and thank you for your help.
1 - PipMeHappy
I would use Fib retracement hoping that, at the next open, price will rise up to back down again.
I say it because looking on Day frame, it seems that a downtrend is going on.
But consider that I just have started demo, so, if I say something horrible, please don’t hesitate to correct me, I’m here for this reason 
Probably another pair would be better to trade using Fib., if you think another one is better, please tell me (maybe GPD/JPY?)
2 - Patg21
Yes, I’m looking for temporal reversal to the top and then come back to the bottom.
I didn’t consider that my end point of the Fib isn’t lower to the last swing low, this is really helpful to me for next times!
For the point where star retracement, thank you for the suggestion, I will use the same point you pointed on the chart.
Thank you both for your consideration!
Charts are all open to interpretation. Personally, I look at the EURUSD & I see it in an uptrend. As a standard rule of thumb, traders look at the daily chart & if price is trading above the 200SMA then it is considered a bull market & if it’s below it’s a bear market. Therefore it could be worth having it on your charts. It’s currently trading above it so that says bull market. Now I know what you’re thinking, a bull market doesn’t necessarily mean an up-trend & you’d be correct (it will need to trend down to pass below the 200SMA in to a bear market).
Below is a quick screenshot that I knocked up on my iPad so forgive the rubbish arrows & lack of text etc. It’s the EURUSD on the 4hr chart.
If you switch to the daily chart & draw a Fibs from the low of the move to the high, it looks like this:
@baz182
Thank you very much for the explanation.
Your arguments are very valid, and now I can see what you’re talking about.
I post the picture of the day frame EUR/USD :
As you can see i marked the last candles just to ask you : doesn’t it seem to be an evening star?
Could I consider this pattern to trade in 4 hour chart?
I know it would be difficult to spot an entry point, but could it be possible that the market will bounce again into bear market?
But I’ve read carefully what you’ve explain, considering the chart, the price will probably rise again.
Now, looking at 4h chart, and considering your explanation, could I put a buy order if the price rise over the 50% fib. retr.?
Or should I wait till a good pattern comes out?
Thank you again!
Hi Bomba,
when I started my journey I tried basically everything and also observed it in details. Fibonacci is one of the things in which I do not believe at all. My advice is to do the school and find something else. Of course every trader is different but Fibonacci showed me its´ “strength”.
Just wanted to give you an advice how you can save some time yourself,
ZR
Maybe some extra reasoning for my scepticism.
In the books and examples Fibonacci looks great and an easy way to work.
However did you ask yourself why are there so many different Fibonacci levels? Also, when you want to use it, on which time frame should you use it? There are so many time frames and Fib levels that 1-2 will always work. Only the other 90% is failing
[QUOTE=“Bomba90;719636”]As you can see i marked the last candles just to ask you : doesn’t it seem to be an evening star? Could I consider this pattern to trade in 4 hour chart?[/QUOTE]
I’m not one for candle stick patterns but my quick google image search concludes that yes, it does resemble an evening star pattern. And yes, you could consider trading it on the 4hr chart (or lower of you wanted). It’s called top down analysis, you’ve looked at the daily chart to gain your bias, in this case you think that it’s bearish, so you’re going down a timeframe & your looking for confirmation of price selling off & you could even go further by jumping to the 1hr chart to look for your entry.
Here’s an article that might help you out:
https://beta.dailyfx.com/forex/education/trading_tips/daily_trading_lesson/2012/06/18/The_Time_Frames_of_Trading.html
[QUOTE=“Bomba90;719636”]I’ve read carefully what you’ve explain, considering the chart, the price will probably rise again.[/QUOTE]
I am by no means saying that price is going to go back up, what I’m saying is that I wouldn’t consider it a down-trend until price broke below what that low & put in a new lower low & if it did that, I’d be looking to go short off the formation of a lower high.
[QUOTE=“Bomba90;719636”]Now, looking at 4h chart, and considering your explanation, could I put a buy order if the price rise over the 50% fib. retr.? Or should I wait till a good pattern comes out?[/QUOTE]
You could put a buy order if it rises above the 50% Fibs but that makes you a bit of a gambler so the latter option is the correct decision, wait for a good pattern to come out. You may miss out on some pips but you want price to confirm that it’s bouncing before going long so if it does bounce & the up-trend is continued, look for an opportunity to buy in-line with the trend on a lower timeframe. You could blindly buy & catch more of the move if it was to play out that way but personally, I’d always want a break or bounce to be confirmed before I jumped onboard.
[QUOTE=“Zarterose;719639”]Also, when you want to use it, on which time frame should you use it? There are so many time frames and Fib levels that 1-2 will always work. Only the other 90% is failing :-)[/QUOTE]
A bearish retracement on the 4hr chart can look like a massive downtrend on the 5mins chart so you could use Fibs to get short on the 5mins chart. Or you could use it on the 4hr chart to see where you’d like to get long again. Fibs can be used on absolutely any timeframe.
And you’re right, it won’t always work. It’s like support & resistance lines, a lot of the time, price will react to them & other times it will blast through them like a freight train through a big sheet of paper. It’s trial & error to see if & where they work & how they’re incorporated in to your system.
There’s 2 types of people that trade forex: those that don’t know what the market is going to do & then those that don’t know that they don’t know what the market is going to do.
Hello again baz1982,
thank you for the article you posted, as I want to be a swing trader, I can say that 1d and 4hr chart are correct for me considering the type of trading I want to make.
I should be honest, starting with nothing but the school of babypips and with some readings about trading, I was excited to trade with Fib. level, as many says, because many traders look at this retracement.
But you know, for me is very difficult to catch the right start poisition, see the right trend and know when enter a trade.
While I was reading at “The time frame of trading” i figured out that there are also several method to use for trading, and I think, just because I’m at the begenning, I should use something more … easy to read technical analysis.
The Stochastic one seems to be good for me, as I can see the trend on daily chart and a good entry point on the lower one.
I think, for the first months, I will demo both strategy, just to figure out with which one I am comfortable.
Than I will take my conclusion and see what will be better.
Now I’m going to put the instrument down to the chart and start see how it works, hoping it could me easier for a beginner trainer to have something more … simple.
Thank you again!
Good move, systems don’t have to be complicated: the simpler you can make them, the better.
You’d need to learn about price action but the simplest way to trade is draw your support & resistance lines on the 4hr chart & then just wait. You only trade when price reached these levels - you’re looking for a break or a bounce.
Hi Bomba,
Lexy, who is an experienced trader, posted not long ago her interesting comments on Fibonacci levels, here:
http://forums.babypips.com/forextown/75007-pivot-points-anyone.html
You’re right, everyone say that simple is better, and I’ve noticed (by the past demo account) that I barely get how to trade because I used many and many technical instruments.
And every time I felt that one wasn’t profitable, I immediately change it, without consider that I should try it for long time.
Thank you again for your support, youre help is very … helpful 
Have a gander over this, it may help you with any changes to your system.
http://www.winnersedgetrading.com/trading-strategy-back-test/
Outline your indicators & your entry & exit criteria, then back test it to gauge its potential profitability (backtest is no guarantee of future performance).
Thank you very much, now I’ll backtest my strategy to see ho I would be profitable :59:
Whenever we are doing any trades the Best Practice is always to make sure that we are testing the system in the Demo account and then we will be able to use that with success
