The video discusses 10 practical uses of Fibonacci retracements, including the importance of a visible trend and choosing the correct price swing. It also covers shallow vs deep retracements and the Golden Ratio Retreat Strategy. The confluence of Fibonacci retracements with moving averages and volume can increase the likelihood of a good trade. Additionally, divergences at FIB levels using RSI, MACD or Stochastic can confirm signals that the price is likely to turn.

Fibonacci Retracement: A Guide to Finding High-Probability Trades

Introduction
Fibonacci retracement is one of the most commonly used price analysis tools by traders around the world. In this article, we will discuss the top 10 practical uses of retracements, best practices for building a trading strategy, and other trading tips to find high-probability signals using Fibonacci.

1. Trend is Key
Before using Fibonacci, it’s essential to understand that there must be a visible trend; otherwise, Fibonacci levels won’t have a meaningful impact on price movement. Fibonacci is an effective method, but you must place it on the swing that makes the most sense for current market conditions. The most important aspect when using Fibs is the presence of a trend.

2. Avoid Short Time Frames
Don’t use the Fibonacci retracement tool on very small price moves or shorter time frames. The shorter the timeframe, the less reliable the retracement levels, making it very difficult for the trader to pick and choose what levels can be traded. Instead, focus on larger time frames when applying Fib levels.

3. Correct Application of Fibonacci Retracement
Using a Fibonacci retracement tool is subjective. There are multiple price swings during a trading day, so not everyone will be connecting the same two points. Here’s how you correctly apply FIB retracements: determine the dominant trend; identify the swing high and swing low before drawing the Fibonacci lines; in a bullish trend, draw the Fibonacci from the swing low to the swing high; in a bearish trend, draw the Fibonacci from the swing high to the swing low, drawing the Fibonacci tool from the wicks of the swing highs and lows.

4. Shallow vs Deep Retracements
In trending or impulsive markets, the Fib levels indicate precise levels where there is a high chance of the market turning back in the direction of the trend. There are two main types of pullbacks using Fibonacci: shallow and deep retracements. Price will make a deep pullback when a trend is not yet clearly established. You will see deep pullbacks to the 61.8, 78.6% and 88.6% Fib levels.

5. The Golden Ratio Retreat Strategy
The 61.8% level is called the Golden ratio. In this example, we found this downtrend and applied the Fibs. If the price moves up above the 50% retracement, but does not close above the 61.8% Golden Ratio, look for a bearish entry. It is okay for the wick of the candle to break the 61.8 line as long as the price closes below it. As the price bounces from the 61.8% Golden Ratio, look for a possible reversal move back down to the 38.2% level. If the price breaks the 38.2% level, the 23.6% may be its next hesitation point.

6. Combine Multiple FIB Retracements
Fibonacci Confluence is essentially combining multiple Fibonacci levels to find clusters where these levels align around the same area. This leads to high-probability setups.

7. Confluence with Moving Averages
Fibonacci and moving averages work well together because both tools are most effective in a trending environment. Using moving average will help you determine if there is a trend. Second of all, moving averages also act as dynamic support and resistance in a trend, which means that adding confluence to a Fib level. There is a combination of elements joining together at one point on the chart.

8. Confirm Fibonacci Levels with Volume
As a trader when you see the price coming into a Fibonacci support area, the biggest clue you can look for is the volume to see if that support will hold. High volume after the rejection of a FIB level represents a very good sign.

9. Look for Divergences at FIB Levels
Rather than blindly entering into a trade because it hit a particular retracement ratio, you need a confirmation signal that the price is likely to turn. Adding a momentum oscillator like the RSI, Stochastic or MACD and looking for divergence signals around FIB levels leads to a higher probability trade environment.

Conclusion
Fibonacci retracements are a powerful tool for traders to find high-probability trades, but it requires the correct application and understanding of the tool. By following the best practices outlined in this article, you’ll be able to build a robust trading strategy using Fibonacci that gives you an edge in the market.