Here’s another successful way you could have traded from 31st December ’till last Friday: Fibonacci Fan and Fibonacci retracement confluence technique. I just observed all these things today, while analysing my charts. There’s so many ways to make money in this market! Take a look:

Fibonacci retracement and Fibonacci Fan confluence technique

There are tons of ways you can make mountains of pips with. You and I need to use our brains more and control our emotions. I, for one, will trade this market until I dream every night what’s going to happen tomorrow. I’m not dropping it until I am a pro. I hope you’ll bear with me.

Cheers!

I promised you a video about how to draw Fibonacci retracement levels yesterday, so here it is. Sorry for my poor English!

If anyone wants this video, just drop a comment and I will give you download instructions. Due to bandwidth problems, I have removed the link.

If you have additional questions, then why not just leave a comment here and I’ll try to help you out.

Cheers!

What is this Fibonacci stuff?

Fibonacci retracement levels are probably the most widely used technical analysis tool after support and resistance levels.

First, I’ll give you some info about what Fibonacci numbers are, so you see where these levels come from.

A Fibonacci sequence of numbers is defined as a₁ = 1, a₂ = 1, a_n = a_n-2 + a_n-1. Thus,we have: 1, 1, 2, 3, 5, 8, 13, 21, 34 and so on.

The golden ratio or key Fibonacci ratio of 61.8% is found by dividing one number in the sequence, by the next number in the sequence, so, for example, 34/55 = 0.618.

The 38.2%, another key Fibonacci ratio, is found by dividing one number in the sequence, by the number found two places to the right, so, for example, 21/55 = 0.3818.

The 23.6% is found by dividing one number in the sequence by the number three places to the right (13/55 = 0.236).

Many traders also use a 50% level, though this is not really a Fibonacci ratio. But since a lot of people use it, it works.

Some traders also use 0.764 (76.4%) and 0.886 (88.6%) , but these are less reliable and are not real Fibonacci ratios.

So how are these used?

Well, most modern trading platforms have a tool that helps you draw Fibonacci retracement levels.

Basically, in a downtrend, you connect the lowest low price of a wave with the highest high price of that wave, using a vertical line. Then, at 23.6% of that vertical line, starting from the top, you have the 23.6% Fibonacci retracement level and so on.

In an uptrend, you connect the highest high price of a wave with the lowest low price of that wave, using a vertical line. Then, at 23.6% of that vertical line, starting from the bottom, you have the 23.6% Fibonacci retracement level and so on.

These lines act as support or resistance lines. When they coincide with a support or resistance line that you’ve previously drawn, they are very strong lines. I will show you how to draw Fibonacci retracements in the next article, when I will be posting a nice video on this subject.