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FIBONACCI IN THE FOREX MARKET - Analytics & Forecasts - 16 February 2024
USD/CAD\xa0daily chart:
Traders may also utilize the Fibonacci retracement from a\xa0high to low\xa0price level as expressed on the\xa0USD/SGD\xa0chart below.
Before delving deeper into practical examples, traders need to have a basic view of the overall market being analyzed (EUR/USD\xa0or\xa0USD/ZAR\xa0etc.). This starts by identifying the trend; this can be long, medium or short-term depending on\xa0trading style. There are various methods that can be used to identify the trend such as simple\xa0price action, indicators like\xa0Moving\xa0Averages (MA)\xa0, as well as other methods. The reason why identifying the trend is important is because the Fibonacci tool itself does not determine a trend bias, rather it identifies key support and resistance levels.
Once the Fibonacci retracement is drawn, traders can use these price levels for possible\xa0entry and exit signals. The\xa0USD/CAD\xa0example below shows how price action tends to revert to the various Fibonacci levels. The blue rectangle highlights the area between the 61.8% and 38.2% Fibonacci levels. It is evident that price respects these two key support and resistance points. Traders may look to enter into short positions at the 61.8% - as a result of the preceding downward trend, with initial support coming from the 38.2% level.
Forex traders often make the mistake of relying solely on Fibonacci levels to take positions in the market but this can be detrimental as this can make them too one dimensional. Additional support from other indicators, chart patterns,\xa0candlestick patterns\xa0and fundamentals are essential to formulate a better overall strategy; and ultimately a well-informed trade decision. The Fibonacci can be an extremely powerful tool in forex trading so fully understanding its foundations can be beneficial to any trader looking to implement the tool within their\xa0trading strategy.
Learn more about\xa0Fibonacci\xa0and other trading related topics by subscribing to\xa0our channel.منبع: https://www.mql5.com/en/blogs/post/756185
HOW TO CREATE A FIBONACCI RETRACEMENT ON A FOREX PAIR
GBP/ZAR daily chart\xa0– uptrend:
USD/SGD\xa0daily chart\xa0– downtrend:
The key levels to look out for are the 38.2% and 61.8% respectively. The 50% level is not technically a Fibonacci level but is often included in charting packages and regarded as an important threshold. This level simply marks half the market move between the initial high and low or vice versa. The chart below shows a simple implementation of the Fibonacci retracement on a\xa0GBP/ZAR daily chart. Highlighted in black are the respective\xa0low to high\xa0points which are used to plot the Fibonacci levels.
Implementing the Fibonacci retracement requires identifying a large move either up/down on the forex price chart. This will produce key levels using Fibonacci metrics. The dueling nature of a\xa0forex pair\xa0has the tendency for mean reversion, which can produce major moves from which Fibonacci retracements can be drawn.