To expand on what Tansen said… keep in mind that fib levels have nothing specifically to do with sup/dem levels. I use fibs frequently, but just know that I use them to give me CONFLUENCE on a particular S&D level… they do not define S&D levels themselves.
Ok, that being said the idea is this: Value in a market exists for BUYERS when price is very low, So low in fact that LOTS of people want to buy, and relatively few want to sell (everyone wants to buy on sale!). Value in a market exists for SELLERS when price is very high, and there are LOTS of people who want to sell, and relatively few who want to buy. (because everyone wants to sell when they can sell for top dollar!)
So, just in terms of basic economic sense… last week established a price range… and at at the high of last week, there were lots of sellers, and not nearly enough buyers. Obviously this is true…because at that point…selling overcame buying, and price never went higher during that week.
And, also, at the low of last week…there would have been lots of buyers, but not enough sellers. Obviously this is true, because at that point, buying took over… selling ran out…and price had to move up.
SO… We want to buy where we know there is LIKLEY to be lots of willing buyers, and not very many sellers. If we can buy where everyone wants to buy, and no one wants to sell…our buy order will make a good fast profit.
So…if we buy closer to the low of last week…it gives us an above average chance of buying when the market is out of sellers…and just buyers are left.
And…in that middle range… we don’t want to do anything. why? because we can’t be sure if there is LIKLEY to be more buyers, or if there is LIKLEY to be more sellers!
Look, it’s like this: Gas prices in my area are around $3.75 a gallon. Tomorrow, if gas prices were somehow $10.00 a gallon… the gas stations would LOVE IT! they would probably even give away free food, and hire chicks in bikinis to pumpu gas for free… JUST to get customers in the door! every gas station in my neighborhoon would LOVE to be a seller…
but ya know what? no one would want to be a buyer. This is the price you would love to be in the gas station business, selling gas. I got it, you need it, and you’ll pay me $10.00 a gallon?! fantastic!
Conversely, if tomorrow, gas (petrol for all the euro locals here) was somhow down to only $1.00 a gallon…man the gas stations would be crying… but the public would be forming lines 3 miles long…going around the block 2 times…just to fill up their tanks. EVERYONE would be a buyer! you would HATE to be in the gas station business on this day!
BUt now…prices are only $3.75. No one rushes to get “a good deal”…and no one is falling over themselves to be able to sell extra gas. You have gas sellers…you have gas buyers… you have some of both.
I don’t know about you… but if I had my choice, I would only want to sell gas if i could get $10 a gallon for it tomorrow.
And, if i had my choice, i would only want to buy gas if it was $1.00 tomorrow.
If I didn’t NEED GAS for my car (and last I checked, you don’t NEED any currency pair you trade… except you WANT it to make money…but you don’t NEED it) I would NEVER buy OR sell it at $3.75…because i really don’t have any great reason to believe it is sure to make me a fortune either way. It’s a fair price for a fair market. and I don’t want a fair price. I want the deal of a lifetime.
So buy low. Sell high. Forget the middle…unless u like to pay your brokers bills.
Get It? Hope so! ![:slight_smile: :slight_smile:](https://forums.babypips.com/images/emoji/twitter/slight_smile.png?v=5)
Jay
BTW… it’s the 38% -62% fib is the no buy zone…not the 38 - 50%