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<span style=”color: #777777; font-family: ‘Open Sans’; font-size: 13px; line-height: 20px;”>The fibonacci retracement is the potential retracement of a financial asset original move in price. Fibonacci retracement use horizontal lines to indicate areas of support or resistance at the key fibonacci levels before it continues in the original direction. These levels are created by drawing a trendline between extreme points and then dividing the vertical distance by the key fibonacci ratios of 23.6 %, 38.2 %, 61.8 % and 100 %</span>
The retracement points are is 23.6% ,38.2%,61.8% and 100% and horizontal lines are drawn at the charts starting from the previous low or high .
From 0 when it moves above 23.6 % it confirms the trend and positions are created one it crosses 38.2 level with the stop loss of 23.6 % level .
Target zone will be 61.8 % after which even if it moves in the same direction likely to come down trade action should be cautious .
horizontal lines are drawn at 0,23.6 , 38.2, 61.8, 100 percentages of previous high and low.
when the price crosse 23.6% zone the trend is confirmed
create positions at 38.2% with SL at 23.6& and target as 61.8%.
While answering the 1st question, I had put a note that how to use Fibonacci series for our trading and technical analysis is clear to me. I went to the recall lessons and learnt the answer.
FIBONACCI RETRACEMENT is based on Fibonacci ratios namely 61.8%, 38.2%, 23.6% (which are arrived by his series 0 1 1 2 3 5 8 13 21 34 55 89 144..up to infinity in which the (from the third) number in the series is the sum of two numbers in the left and 61.8% is the % arrived by any number in the series divided by its next right side number in the series EX 13/21 or 55/89etc and 38.2% is the % arrived by any number in the series divided by its second number at the right side in the series EX 21/55 or 55/144 etc and 23.6% is the % arrived by any number in the series divided by the third number at the right side in the series EX 21/89 or 34/144 etc)
FIRST OF ALL draw the horizontal lines regarding the SUPPORT level and RESISTANCE level of the stock by noting SUPPORT as 0% and RESISTANCE as 100%
NOW draw horizontal lines with respect to FIBONACCI RATIO s 23.6% ,38.2%, 61.8%
IN THE BULL TREND
IF THE PRICE MOVES UPWARD AND CROSSES ABOVE 23.6% then it is the SUPPORT and the next RESISTANCE is at 38.2% LEVEL
if the price still moves UP and crosses ABOVE 38.2% level then it is the SUPPORT and the next RESISTANCE IS at 61.8%
IN THE BEAR TREND
IF the price goes down the 61.8% then this is the RESISTANCE and the SUPPORT is at 38.2% level
IF the price goes down the 38.2% then this is the RESISTANCE and the SUPPORT is at 23.6% level
THESE ratios should be used in conjunction with technical analysis.It can be used to identify the resistance and support regions.
Draw horizontal lines joining the 2 extreme points.These lines are drawn with respect to the Fibonacci ratios 23.6%,38.2%,50%,61.8%,100%.This will divide the vertical region into 5 blocks.After a significant prize rise or down the new support region will be at or near these ratio lines.
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