How to use Fibonacci Lines to Make Money in Trading

How to use Fibonacci Lines to Make Money in Trading

Index
The Fibonacci indicator in trading: what is it about?
The presence of a trend
Evaluating trends with Fibonacci retracements
The Fibonacci indicator and the Forex Market
CFD trading and Fibonacci indicator
Fibonacci indicator: arches and fans
How to draw Fibonacci lines?
Understanding fractals
Setting up the Fibonacci lines
Fibonacci trading strategy to make money on the stock exchange
The Fibonacci indicator in trading: what is it about?
The Fibonacci indicator is a particular trading tool that is used for the technical analysis of market trends. It is based on the identification of the different trading levels in a chart and is also commonly defined with the name of Fibonacci retracements .

At the base of this instrument there are numbers that are calculated using Fibonacci theory , an Italian mathematician of the medieval period whose work was based in particular on specific mathematical instruments for elaborate calculations. The trading analysts have pointed out that the Fibonacci numbers could be an interesting tool for the assessment of market trends : the purpose of retracements, in fact, is to identify the different levels, defined by the Fibonacci numbers, that will recognize oscillations more or less consistent with the average market trend.

The calculation of Fibonacci numbers does not have to be done by the trader: today the best trading platforms offer functions that allow you to calculate the results simply by setting the starting and arrival values ??on which you intend to operate. It should be emphasized that the strategies based on the Fibonacci indicator are on average complex and not suitable for traders from the first experiences.

The presence of a trend
Before highlighting how convenient it is to use the Fibonacci indicator for the analysis of one’s trading in Forex , CFDs or other assets, it is necessary to understand when this tool can be used. In fact, it can only be applied in the presence of a well-defined trend . In fact, if you take into account the prices of an asset, you can easily see that they present continuous fluctuations which, however, can define a recognizable trading trend, whether ascending or descending: the movements from the trend are called retracements. An experienced trader must be able to recognize the retracements – which are always followed by a return to the main trend – from the trend variations of the trend itself, i.e. from the occurrence of reversals that lead ascending trends to become descending and vice versa.

The use of Fibonacci retracements makes it possible to understand whether, after moving away from the main trend, the price of the asset considered will go back or if it will reverse its performance.

When we talk about trends, we can talk about a short, medium or long term trend : in the case of the Fibonacci retracement strategy, it is customary to use daily time intervals, avoiding too short time ranges that would not allow to calculate accurately the chances of a turnaround.

If you want to start trading using the Fibonacci Strategy, we recommend that you evaluate the following three brokers. They are authorized by Consob to operate in Italy. They are safe and offer free online trading courses to learn how to use all online trading techniques.

Evaluating trends with Fibonacci retracements
fibonacci-spiral

In order to use the Fibonacci strategy, for the analysis of the trends of the asset taken into consideration, it is necessary that the trading platform on which you operate has this specific tool. If not, you can rely on other sites, such as TradingView . The first step is therefore to define the trend on which you intend to operate and the minimum and maximum points of a price . If you are operating on an uptrend , therefore, the minimum point will be the lowest value of a price, while the maximum will be the highest one and that is recorded before a possible trend reversal. These two values ??will be automatically assigned the values ??of 0 and 100%.

The oscillations from the main trend, that is the retracements , are usually recognized by the calculation software and related to specific values: the fundamental numbers in the Fibonacci theory. These numbers are 23.6%, 38.2%, 50% and 61.8% .

While the first three values ??(23.6%, 38.2%, 50%) are indicators of the presence of resistances , 61.8% allows to identify not a retracement, but a change of trend . Without dwelling on the mathematical meaning of this value, it is important that those who make investments on the stock exchange know that when a trend reaches the value of 61.8% it is likely that an inversion of the trend can occur . Since we are talking about market trends, we must underline the probable word and remember that online trading always presents a certain risk due precisely to the impossibility of predicting market trends 100% .

The Fibonacci indicator and the Forex Market
Fibonacci Forex

The Fibonacci retracement strategy can be applied to different assets and markets, including Forex . If you use this analysis strategy in Forex, however, it is always recommended to associate it with another technical analysis thus creating a combination of analysis tools. In the case of very volatile markets, in fact, the Fibonacci indicator may not be sufficient to guarantee correct recognition of trends, retracements and trends. However, it represents a very useful tool for placing orders such as stop loss, which can be fixed on one of the values ??of the percentages defined by Fibonacci: the choice depends above all on the type of trading that is conducted and on the specific needs of the trader.

Among the most used Forex trading strategies in association with Fibonacci retracements is that of trend lines . Both, in fact, aim at the recognition of supports and resistances thus guaranteeing greater security in recognizing market trends and a higher chance of success when deciding to place an order.

If you want to start trading using the Fibonacci Strategy, we recommend that you evaluate the following three brokers. They are authorized by Consob to operate in Italy. They are safe and offer free online trading courses to learn how to use all online trading techniques.

CFD trading and Fibonacci indicator
Even those who make CFD investments can make use of the Fibonacci indicator: however even in this case it is necessary to know that this trading tool is not always sufficient to guarantee maximum security in the analysis of the assets. The Fibonacci retracements, in fact, especially in the case of high time ranges, can lead to false signals that do not allow to better define the main trend and, therefore, the trading operations to be carried out.

As for Forex , even in the case of CFDs , for example of stocks or cryptocurrencies , it may be convenient to associate other analysis tools with the Fibonacci indicator , to have greater certainty in recognizing the main trend and the different retracements. In addition, as already highlighted at the beginning, please note that the use of Fibonacci retracements is not indicated for novice traders and in particular it is not recommended for the less experienced when trading with CFDs . The high volatility of some assets, and the presence of leveragein this type of trading, in fact, it leads to the need for a more in-depth and detailed analysis that can only be carried out by more experienced traders. But don’t despair.

You can learn to invest and use this indicator by relying on brokers who have a free study service. These include ForexTB , Trade or IqOption . You can click on the names of the brokers to be directed to their offer .
You can avoid learning simply by following what eToro professional traders do . In fact, thanks to their tool called Copy Trading , you can watch what other investors are doing, follow them and automatically open the same trading positions. The whole thing is very simple to do. Click here to try .
You can continue reading this guide and learn a strategy for using the Fibonacci indicator and making money on the stock exchange.
Fibonacci indicator: arches and fans
When we talk about Fibonacci indicators and retracements, we almost always refer to the instruments that recognize the price areas and any supports and resistances by tracing straight lines. However, there are two other different strategies that make use of Fibonacci’s numerical theories, namely arches and fans ( Fan Line ).

These can be considered as more complex interpretations of the recognition of price areas but, just as in the case of standard tracking, the trader will not track everything as much as the software. In the case of Fibonacci arches , the price areas are delineated within curved lines , i.e. arcs. In the Fibonacci Fan Line , on the other hand, the price areas are defined by lines that start from the minimum price (or the maximum) taken into consideration, and end on the values ??of the percentages 38.2, 50 and 61.8%.

Of course, when choosing the trading platform , it is necessary to make sure that it has these tools, that is, the different analysis options through Fibonacci theories and not just the standard ones.

If you want to start trading using the Fibonacci Strategy, we recommend that you evaluate the following three brokers. They are authorized by Consob to operate in Italy. They are safe and offer free online trading courses to learn how to use all online trading techniques.

How to use Fibonacci lines?

It is possible to earn using various trading strategies , one of these, which we will explain in the following paragraph, can help you increase your profitability with Fibonacci lines.

You will have understood that Fibonacci numbers and the relationship between a series of numbers seem to have magical properties, right? Well, this has nothing to do with trading.

Fibonacci numbers are to be used to measure price share retracements . So if a significant group of traders believe that the retracement will stop and resume its original direction, at a certain level of Fibonacci retracement , these same traders will invest money on a certain price.

The more money will be invested on a certain price, the higher the probability that the price action will turn into that value .

On the other hand, some traders want to anticipate the events, so they will open positions before checking that the Fibonacci indicator gives positive signals, others want to get the best possible price during the trend reversal, so some of them open positions after having received the signal and have reached the Fibonacci percentage favorable for their purpose.

This creates an area around a Fibonacci retracement layer .

linee_fibonacci

If you want to start trading using the Fibonacci Strategy, we recommend that you evaluate the following three brokers. They are authorized by Consob to operate in Italy. They are safe and offer free online trading courses to learn how to use all online trading techniques.

How to draw Fibonacci lines?
Understanding fractals
To begin an explanation of how to draw Fibonacci retracement lines , we must begin by briefly explaining what fractals are.

A fractal in trading is a candle that occurs at a higher price level than the two previous candles . And two successive candles, downwards, with a lower minimum than the previous two and the next two candles.

In the image, you can see fractal candles marked with the Fractal Williams marker . You will see a mark above each fractal and a mark below each fractal. The Fractal Williams indicator is a standard indicator included in most trading platforms .

Leave a Comment

Your email address will not be published. Required fields are marked *

Open chat
1
Hello Trader!!
How We Can Help You?