Fibonacci Trading is not difficult. If you are new to using Fibonacci tools then look around this site and be sure to download our free manual and Fibonacci trading system. The system is simply a tool that you can use to begin to learn just how you can use Fibonacci trading tactics in your overall trading strategy. Fibonacci trading simply involves measuring swing highs and lows and attempting to forecast price reversals and continuations. If you are brand new to trading take a look at the article here titled Fibonacci explained, and don’t dare leave without downloading the manual right here…
Fibonacci trading concepts can get complicated, the story and science behind it can get fascinating and even a bit overwhelming. If you want to learn about the theories and science behind Fibonacci trading concepts you are at the wrong web site. If however you want step by step instructions on how you can begin to apply the trading principles using Fibonacci then you have the arrived.
Fibonacci Trading – What it looks like
When price makes its way in any direction up or down a Fibonacci retracement measures its mark back to where it started. So lets say price started at 40.00 and then went to 50. That’s a 10.00 move right? Well generally speaking after a move like that there tends to be a degree of profit taking from traders. People are going to start selling off and cashing in on the move. These moves and profit taking scenarios are what causes the markets to move up and down. Generally in a bull market you will see a large move up, a retracement profit taking period and then a new thrust up once again.
The market stays bullish as long as the profit taking doesn’t meet or exceed a 100% retracement.For example a $10.00 move up in a week, then a $5.00 retracement the next is a 50% retracement. If price moves up $10.00 again then we are making bullish progress. $40 to $50 is a $10 dollar move. A pullback or retracement to $45 is a 50% retracement. A new $10 dollar move up is a target of $55. So in time we are making our way up in a fashion that is as old as time itself.
These Fibonacci trading principles are called retracements. Even if price were making 76% retracements we are still making bullish progress. Weak progress but bullish none-the-less. In a super strong bull market a retracement as little as 23.6% is commonplace. So you see the degree of retracement can tell you much about market strength. Lastly anything beyond a 100% retracement is called a Fibonacci extension.