In the chart below, for example, why would someone draw Fibonacci retracement from point A (swing low) to point C and not D? What really determines the other point? I know the next point should be a swing high, but how do you know the right point when a trend has a number of swing highs (B and E included)?
People DON’T draw fibo like that …?
Here is (1) Possible Way. " Using the standard MT4 Fibo Ratios "
There are others… But you start at X - A // Low to High or visa / versa
then measure the Retracements…
If you Study Fibonacci you will see his was very Clever Man. and then understand his Ratios.
So you mean that you can’t draw from point B to A on your chart?
Why not from X to the swing high between X and A?
You Could do how you Like, But you should be Measuring from Point X a Low to Point A the HIGH …
OR the other way around X-HIGH to A-LOW
Well you would have done that first But it only retraced a Fraction of the BIG move up …
You would have then gone long on the break of the HIGH and bagged 180 pips…
You could have even turn Fibo upside down and seen it retraced just shy of the 38.2
then break the Resitance and if you enter there would have bagged 250 pips…
Dont forget this is the DAILY chart and moves take longer to play out.
also people see market in different ways.
But to answer your question The correct way to use fibo is to measure from a swing low—X to a swing high----A // or other way round then measure the retracement.
It depends on your outlook if youre looking for a longer term trade you need to widen the fib if its short term go from the most recent swing high to low for retracement for a buy and vice versa for a sell
If your unable to grasp the concept of using the fibo correctly then god help you when you start reading about GARTLEY and his MUTANTS… LOL
Thanks Craig. I was thinking about the timeframe as the reason.
I appreciate your contribution A1len, and will also check out Gartley.