Hello to all. I’ll cut right to the chase. In the lesson dedicated for Fibonacci retracements, we have the image shown below that describes how to draw these levels in an uptrend. I just want to know why we skipped the swing lows between the selected swing low and swing high, despite the lesson stating that we should connect the most recent ones. Thanks
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I haven’t done this learning but this is a great question.
It highlights the unhelpful tendency across trading of using selective segments from charts, skipping the use of strict rules for identifying artefacts like swing high or low, support or resistance, congestion, trend etc.
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Maybe I am not understanding this correctly, but a Fib is drawn between the levels you want to investigate. You start it where you want and you finish it where you want (usually at the current level). So any swing low will be the low you chose. The Fib retracement is about expected retracement, based on your chosen timeframe. Or am I missing something in the question?
Hi TradingFan,
If I understand your question correctly, the swing lows between both swings selected in the picture are called pullbacks.
During a trend, price often retraces before resuming its move. So, while a pullback is a temporary retracement, a swing is the big move and the corrective movements (pullbacks). In this sense, pullbacks are often considered part of swings, as they contribute to the overall movement.
Cheers.
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That’s very illuminating. Thank you.