Fibonacci trading analysis IQ Option
Using Fibonacci Lines in Trading
Fibonacci Lines are a strong technical analysis tool that
may be applied to both downward and upward trends, all property and timeframes.
The tool is represented on the price chart like a collection of horizontal lines that correspond to
Fibonacci ratios of 23. 6%, 38. 2%, 50%, 61. 8% and 100%. It is designed to find the most probable support and resistance levels. The tool is named following a 13th-century Italian mathematician Fibonacci and his self-named mathematical sequence.
The tool is represented on the price chart like a collection of horizontal lines that correspond to
Fibonacci ratios of 23. 6%, 38. 2%, 50%, 61. 8% and 100%. It is designed to find the most probable support and resistance levels. The tool is named following a 13th-century Italian mathematician Fibonacci and his self-named mathematical sequence.
How you can Use Fibonacci Lines in Trading?
To make use of the tool effectively we first need to understand what support and resistance levels do represent. Support and resistance levels are psychological barriers that the value action is believed to test while moving in a specific direction.
When approaching perhaps one of the levels, the tendancy could be expected to either continue its movement or bounce back and reverse. Trend reversals are believed to happen more frequently all around the retracement lines.
Retracement is really a short-term price movement which goes against the general trend, and Fibonacci Lines master identifying these moments. The tool can be utilized for determining both buying and short selling opportunities.
Throughout the uptrend, Fibonacci Retracement can be utilized like a buy signal throughout the pullback. Throughout the downtrend, Fibonacci lines can be utilized to work out optimal short selling positions.
Experts believe the most significant retracement level to follow is 61. 8, which may also be explained with basic market psychology. The potential of price swings in this region is higher because of extensive buying or selling pressure (with respect to the trend direction). Do not forget that retracement could be confused with trend reversal, which can negatively affect your trading performance.
It may also be wise to accompany Fibonacci Lines with
perhaps one of the momentum indicators (e. g. Stochastic Oscillator or MACD).
Fibonacci Lines could be activated in only foure clicks
Establishing Fibonacci Retracement is straightforward. Click the ‘Graphical tools’ button and choose ‘Fibonacci Lines’ coming from the collection of available tools. Discover the most recent swing highs and swing lows. For downtrends, click the swing high and drag the cursor to the foremost recent swing low. For uptrends, conduct the opposite : click the swing low and drag the cursor to the foremost recent swing high. Fibonacci Retracement levels will then show on the value chart.
Conclusion
Fibonacci Retracement is definitely an interesting technical analysis tool with limited, yet useful functionality. Fibonacci Lines help to recognize optimal entry point throughout the so-called retracements.
Traders, however, need to be remember that support and resistance levels provided by this tool aren't always foolproof. Instead, they represent “areas of interest”. Fibonacci Retracement doesn't provide enough information to apply it like a leading indicator but could be turn into a useful complementary tool for creating medium and long-term decisions.source: www.iqtrick.com
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