FineTuning Fib Lines
Instructor’s Response:You have the right idea here…The Fibonacci Tool is designed to measure retracement potential after a strong move in one direction or the other. A trader would wait until a retracement level is reached and the price action indicates a “bottoming out or topping out” around that level. Then, in this case since the trend is to the downside, a short position could be taken with a stop just above the highest wick at the Fib level where the price action topped/bottomed.You have correctly used it. However, two swings to the upside have occurred since your original "top" presented itself. Since the 38.2% level is quite a distance (about 1200 pips) away, it may not make it back to that level. Try drawing the Fib line using more recent Swing Highs as represented with the Red and Black line on the historical chart below.
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