Oh I AM STUCK With Fibonacci! pls help!

Beginner Questions
1

I am stuck with this but I know this is the most preferred so someone please help…
[B]I will tell you how I have understood the Fibonacci Retracement Techniques. In an uptrend (0-100) when the market retraces at 61.8 I expect it to reach 161.8 and I do the same thing for other points to like if it retraces at 50 I expect it to retrace to 150. IS THIS TECHNIQUE CORRECT? [/B]

It will be great if some one can advise me on this, thanks to babypips for giving me an opportunity to interact with folks like you

2

That isn’t how it works. The extension and retracement levels function individually. Thus, you could expect price to find some sort of exhaustion at extension levels.

3

I’ve read in so many places that ideally profit targets are projected the way you put it, but that does not happen frequently.

As This Barb said, most of the time price find exhaustion at one of this level, but not exactly at the combinations you wrote. So look for a better technique to take your profits depending on your trading style. Don’t rely solely on this rule. :slight_smile:

4

“The extension and retracement levels function individually.” Can you please explain how???

5

Can some one explain how the retracement works?

6

Hi,

I think if your looking for a when x happens y will be guaranteed - it may occur at times but your barking up the wrong tree, the market simply does not work that way. Instead of narrowing your horizon widen it.

I use fibs as a secondary indicator, pay more attention to the 50 and 61.8. And look for them to overlap support or resistance.

A good example is what is going on with the euro at the moment, its in a downtrend, there have been many retracements intraday to 50 levels which also corrospond to resistance, those are the ones that tend to be stronger.

Pay attention to the global fundamentals whats happening out there - the big players pay a lot of attention to those and so should you.

N

7

Ok, there are many different techniques for using the fib ratios, the most basic and commonly used being the retracements and extensions.

The fibonacci retracement levels are the 23.6%, 38.2%, 50%, 61.8% and the 76.4% price levels.

The level at which price retraces to after a swing high to low or vice versa depends on the strength of the trend and the volatility of the pair being traded.

Generally you will look for the pair to reach at least the 61.8% fibo level before taking a position and possibly setting a stop just past the 76.4% fibo level although quite commonly the pair will retrace at one of the lower fib levels.

You should use the fibo levels in conjunction with other price action analysis such as support and resistance, candlestick patterns, chart patterns, etc.

I personally will take a position at the 61.8% price level if if coincides with one other form Price action analysis such as a trendline however if using one of the lower fib levels such as the 38.2% fib level i would look for a much stronger signal combining a few trigger points such as a support line that has now become resistance, a trendline and possibly a candlestick pattern or something along those lines.

Now the extension levels again are completely discretionary, there is no complete science as to where the pair will go after it has retraced from a particular price level however there are again some particular levels traders tend to look for, the most common being the 161.8%, 261.8% and the 423.6% price levels.

Now as with the retracement levels you should be looking for these extension levels to coincide with some other form of price action analysis as confirmation.

so to summarise:

All fibonacci retracements and extension levels are discretionary and you can never be sure exactly where price will begin to reverse although some levels are stronger than others.

Fibonacci levels are stronger when combined with other forms of analysis.

Hope this helped :slight_smile:

8

that is heart breaking [B][I]but thanks a lot for your detailed analysis[/I][/B] on Fib or else I would have trusted an illusion. Now if the trend is bullish and if it retraces at 61.8 can I expect it to retrace upto 161.8 ? or is it still risky to try that so???

9

No, you cannot expect it to extend up to 161.8%. Again, each Fib level functions individually and are not made to work in pairs. You look at them as simple, temporary S/R levels (and quite frankly, weak ones). After drawing the Fib, if you see price weakness near one of the levels, you can suspect a bounce. Fibs cannot tell you how far that bounce will be. In actuality, there is no way to know how far price will go.

11

Oh, then can you please tell me what Fib Retrc is used for?

12

Using Fibonacci in trading has become so subjective that you pretty much have to figure it out for yourself to use it effectively. Also, Fibonacci becomes so much more useful when used in conjunction with Elliot wave counting.

13

Thanks a lot

14

yes. to use fibs you should be very confortable with elliot wave theory. they are very related… but is a very advanced way to trade

15

If you are not sure as to whether or not you are doing it it right, there is only one way to find out.

Using elliot waves and fibonaci together, you should be able to project some fairly acurate support and resistance levels for usdchf:

Take a stab at it, and we will correct any mistakes.

If not, try learning at the School of Pipsology.

16

Fibonacci is mostly useful in hindsight, which doesn’t make it that much use for trading in practice, which Fibonacci do you trade off? The high and low on the chart, or the high and low on a little bit more of the chart or a little bit less?

Two things you definitely can’t to is expect the market to do something and secondly project what the market will do, forecasting weather is precision engineering compared to currency forecasting.

17

I use the fibonacci on the extremes of each individual wave.

18

Thank you all…so I think I should be using Fib Ret only when the trend is strong either bullish or bearish right?? I am correct?

19

If fibonacci doesn’t work for you forget about

20

OK, here goes. The charts used were weekly charts going back to March 2009.

The highest high was on the w/c 09mar09 and reached 11967.1. The lowest low was on 23nov09 and touched 9915.4.

The Fib levels here were 61.8% - 11183.5; 50% - 10940.8; 38.2% - 10698.2; and 23.6% - 10397.9. A level at 76.4% was 11483.7 - this isn’t calculated on my charting software, so had to get the calculator out!

From the nov09 low point, the market rallied and broke through all Fib levels to just above the 76.4% point before turning south after hitting 11586.2 during the week of 31may10. The LL of 10065.3 was hit this week and is currently around the 10124 level.

There was high volatility for the week of 16mar09 - 751.9 pips! - that came on the back of a massive fall of over 1800 pips in dec08!

Anyway, I digress.

What does all this mean? Here I have a problem. How do you interpret the information to hand?

Steve.

Fib chart mar09 to sep10.jpg700×354 40.3 KB