In the last post we talked about our USDJPY swing trade that made 1000 pips in 2 weeks. Swing traders use Fibonacci Levels a lot in trying to figure out what the market is trying to do. But you cannot use Fibonacci Levels alone. You should combine it with candlestick patterns like the inside bars to determine whether the market is going to reverse or not.Watch this video below that explains how you are going to use Fibonacci Levels to predict the turning points in the market.
The video below explains how to use Fibonacci Retracement to make low risk entries. It also explains how to use these levels for setting your profit targets.
https://www.youtube.com/watch?v=IKVLq67U-D4
The video below explains advanced fibonacci trading strategies!
In the above video Barry Burns explains his advanced fibonacci trading strategies. You must have guessed now that fibonacci levels are not going to predict a major market reversal. These levels are only used when the market retraces and then reverses and starts traveling in the direction of the trend again. The most important levels when drawing these levels is the major swing high and the major swing low. You connect these 2 points. Fib tool automatically draws these levels. When the market reverses you see how the market behaves at the 38.2% and 61.8% level. If you find an important candlestick reversal pattern formed on anyone of this level, you have a strong signal that the retracement is over and the market will start resuming in the direction of the trend.
Keep this in mind that you cannot trade these levels on your own. You need to combine them with candlestick patterns to figure out where the market is going to reverse. This is also known as Confluence when 2 or more technical tools confirm each other. You should also watch this webinar recording on highly profitable candlestick patterns. What makes fib levels so important is that they are leading signals. These levels tell you in advance where the market can show reaction. How do you know that the market has shown reaction at a particular level? By looking for high probability candlestick patterns close or on that level that signal a reversal.
What Are Fibonacci Fans And Arcs?
This is something more advanced than the retracement and extension. Fibonacci Fans and Arcs are used by advanced traders. Watch the video below that explains how to trade with these fans.
This is another good video that explains what are these fans.
What Is Fibonacci Time Analysis?
You can also do Fibonacci Time Analysis. Fibonacci Time Zones are used to determine the periods in which the market is expected to experience big moves. This is another tool that is often used by advanced traders. Watch the video below that provides you with an introduction to this advanced tool.
Time zones is an important concept that you should explore further. As said above you only need candlestick patterns and these fibonacci levels to make high probability trades. Watch the above videos, you will understand how to draw these levels and how to identify the market turning points.