You Don’t Use Fibonacci When Trading? Are You Blind?
If you have been day trading for a while, and regularly using charts, it’s pretty certain you have used or come across Fibonacci retracements before. In most charting platforms you’ll find this tool located around with the trend lines options. The Fibonacci retracement tool is usually very easy to use, by clicking on a low and dragging the mouse to a high which places the retracement automatically at the Fibonacci levels in between. Some platforms also give you Fibonacci projections which stretch beyond the high or low and help forecast possible targets for price.
The calculation for Fibonacci is often called the Golden ratio. If you don’t understand what this means then let Google be your friend, there’s a ton of information online about the Golden ratio. The only thing which traders need to understand is that price tends to bounce or accelerate at some of these key levels. Long-term traders watch Fibonacci levels for key support and resistance areas on weekly charts, and short-term traders will use the levels for intraday support or resistance, or even targets.
This video below from YouTube shows you how to place Fibonacci levels on your chart, starting in a long time frame and working down to shorter time frames. If you are trading in an extremely small time frame such as the one minute, or five minute chart, you can still make use of this method by placing your longer-term Fibonacci levels on four-hour or one-hour swings. It’s also useful the way that this guy color codes each time frames levels. This will make things easier to navigate in a small time frame.