Fibonacci retracement levels are used as support and resistance levels. Fibonacci extension levels are used as forex d taking levels. So, what we will learn today is how to apply Fibonacci tool and how to interpret results that we see on the screen.
Fibonacci tool available within their trading platforms. So, click on Fibonacci tool from trading platform that you use. A — our lowest swing, B — our highest swing. So, we will look to BUY some lots at the good lowest price and go up with the trend. Click on A and drag your cursor to B, click. You must see different lines appeared on your chart.
Those lines are called Fibonacci Retracement and Extension Levels. To calculate Fibonacci levels yourself, refer to How to calculate Fibonacci levels. B to some point C, and then continue up in the direction of the trend. Fibonacci retracement levels where we expect the price to take a U-turn and go up again. There we will place our BUY order. The best situation would be to buy at the lowest level — 0. And on practice the price usually gives us this chance.
500 is also a good level to place a BUY order. Well, let’s take a look at the progress. The price has successfully reached the lowest 0. 618 point and made a U-turn. So, now when we have our BUY order placed at desired point C, we would like to set some targets to take our profit in the future.
618 extension level, but when the price shows good potential to reach next 1. 618 level, you can leave your trade to get that target too. 618 extension level as our profit target, and according to Figure 2, D is our point for taking profit. Important note: in this Fibonacci tutorial 0. Thus moving further from B would be 1xx.
For example: looking at the last picture, if to start counting from point A, then point D would be a 1. 618 Fibonacci extension level or a 161. Forex trading is a high risk investment. All materials are published for educational purposes only. Yet, same as years ago, traders keep making mistakes, recovering and just to find that there are more challenges ahead. Any attempt to trade without analysis and studying the market is equal to a game.
Never invest money into a real Forex account until you practice on a Forex Demo account! Allow at least 2 months for demo trading. A good demo account to start practicing with could be, for example, FXGame from Oanda. Trade with the trend to maximize your chances to succeed. Trading against the trend won’t “kill” a trader, but will definitely require more attention, nerves and sharp skills to rich trading goals. When a trend is up you don’t want to be selling.