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Tips on the Fibonacci Tool

Tips on the Fibonacci Tool

Richard Krivo, Trading Instructor

Instructor's Response:


That is the way that the Fibonacci tool would be used in a downtrend.  Keep in mind, however, that price can retrace beyond the 50.0% level. Wait until  the 50% level is tested twice before making the determination to take a short position. Then a stop can be placed a bit above the highest wick in the formation.
Also, for the most accurate usage of the Fib tool, be certain that the line is drawn from the top of the wick on your Swing High to the bottom of the wick on your Swing Low in a downtrend. The reverse would be true in an uptrend.
See the chart below for an example...
chart 5 11 10

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.