By Yan Petters – The Fibonacci Retracement Lines are a fantastic tool that our platform provides you in order to detect future movements. In case you don’t how to use it, do yourself a favor and read the rest of this article.
How to set it?
First of all, open a chart, it doesn’t matter which one and make sure that the crosshair is switched on. Now, choose a certain time frame, for example the last 20 candles. The next thing you need to do is to spot the highest level and the lowest level of the frame you chose. On the chart you have the option to draw a trend line. Please click on the down arrow next to it. Various options will be opened – choose Fibonacci Retracement. Now what you need to do is to stretch the Fibonacci retracement lines from the left to the right of the frame you chose before, making sure that the highest line (the 100% line) touches the highest level of the chart, and the lowest line (the 0% line) touches the lowest level of the chart. It should look like this:
* Do you see that within the box I chose, the 100% line and the 0% line touched the highest and lowest levels within the box? It didn’t match the highest and lowest levels of the chart, but it doesn’t matter – you get to choose what will be the time frame, and this time we have limited the time-frame to the box.
Now how do we use it?
Very simple, just follow the lines. The idea is that if the pair has breached a certain level, it is likely to reach the next level, and so on. On the other hand, if the pair fails to breach a certain level, it is likely to reverse and reach its previous level once again.
Do note that the same as anything else, the wider the time-frame you pick, the more accurate the Fibonacci prediction will be. I do not recommend using this method with the 5-miutes chart or the 1-hour chart. The 4-hour chart seems to be the minimum time-frame required. Do bear in mind that using the 4-hour chart is useful only if you’re planning to keep the position open for a day or so. Otherwise, don’t waste you’re time on this strategy.
Forex Market Article provided by Forex Yard.
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