Learn how to use Fibonacci to identify key levels to enter a trade and potentially ride a trend higher or exit it. This course covers what Fibonacci is, how to plot it on a chart, and trading strategies. Fibonacci retracements are plotted by taking the lowest point of a trend and the highest point and using common levels such as 23.6%, 38.2%, 50%, 61.8%, and 78.6%. The golden pocket is a level where traders love to see the price go, as it indicates a strong bounce if the trend continues.

Using Fibonacci Retracement for Better Trading

Introduction: Understanding Fibonacci Retracement

Fibonacci Retracement is a powerful tool that many traders use to enter and exit trades. It is based on the Fibonacci sequence, which is a mathematical progression series found in nature. By using this tool, traders can identify key levels in a trend where the price may revert, and these levels can be used as entries for better trading opportunities.

How to Use Fibonacci Retracement

The first step in using Fibonacci Retracement is to find the lower and upper bounds of a trend. This is done by identifying the lowest and highest points of the trend. The lower point is where the absolute lowest price of the trend has occurred, and the upper point is where the trend has reached its highest level.

Once these bounds are identified, traders can use a Fibonacci tool on their trading platform to automatically plot the Fibonacci retracement levels. These common levels are 23.6%, 38.2%, 50%, 61.8%, and 78.6%.

The Golden Pocket

Traders often seek the Fibonacci “golden pocket,” which is a retracement level that typically sees extremely strong bounces in price. This level is found between the 61.8% and 65% retracement levels and is a key area where traders like to enter trades.

Using Fibonacci Retracement for Trading Strategies

Now that we understand how to use Fibonacci Retracement, we can use it in trading strategies. One common strategy is to look for a strong trend and then wait for a retracement to one of the Fibonacci levels before entering a trade. This ensures a better entry with less risk.

Another strategy is to use Fibonacci Retracement to set exit levels. Traders can use these levels to set profit targets for their trades, ensuring that they exit at key levels in the trend.

Conclusion

Fibonacci Retracement is a powerful tool that all traders should consider using. By understanding how to use it, traders can enter and exit trades with greater precision and less risk. Whether you are a beginner or an experienced trader, Fibonacci Retracement is an essential tool that can improve your trading performance.