How the Forex Market Reacts to Fibonacci Levels?

Hey vahid
I believe you made a typo when you wrote 161.80% instead of 61.8% from the following statement in regards to the second to last Eur/usd daily chart.
“Here you can see better how the yesterday’s daily candlestick went up as soon as it touched the 161.80% level.”

great fibs info. I didn’t know fibs can be use that way. Meaning it can be use as a support instead of resistance when we draw the fib line from top to bottom of a downtrend!

Vahid the green arrow that you have on the chart is it from the metatrader platform? If it is what is the arrow code?

Hi Vahid
I trade on the Go Markets Platform which, I think is the same basic platform as your metatrader but the thing is that my trend lines and your trend lines plotted on the same pair do not end up in the same place.(I am looking at the EU chart)
Consequently I can get a completely different view of the current candle.
I would like to show you my chart but I can’t see anywhere to attach it here.
Do I have to go to the Discussion pages to do that??
Ian

Hi Ian, I am thinking of registering live account with Go Markets also (good for Au.). Please, would you mind to post screenshot-s you mentioned in the discussion board. If the topic was discussed with Vahid, and advice, it would make it a lot easier and clear for us. Thank you!

Hi Vahid,

Fibs are wonderful to work with, and I am still learning about the power of the fib sequence in trading. You have only discussed fib percentile retracement levels, and not the use of actual fib numbers in trading. I find it very useful to use the actual numbers themselves, to determine tops, bottoms and pauses. This works on every time interval, and, at times, it is suprisingly accurate, though generally, it provides an area of support or resistance, much like the Fib retracement levels do.

When I say, using the actual numbers, I mean the sequence - 34, 55, 89, 233, 377, 610, 987… These numbers are etched into my trading mind, because I use them so much, and just like in nature, these numbers continuously pop up. Quite often, you will see a move of around 89 pips, and if it breaches that number, it will often go to the next number. I have provided some examples below.

Take 12/13 Nov chart of GBPUSD and look at the 15 min interval (my chart is GMT time). It forms a bottom on 12th around 1.6515. Look at what happens in Asian trading on 13th… it moves to 1.6605 and bounces off this level several times before a UK morning breakout - this is 89 pips from the low of the 12th. Once it broke through this level, I was confident of a move higher, to 144 from the 12th low, maybe up to 233. It smashed through 144, but didn’t get to 233, being stopped at 1.6700. Now, look at the retracement from the high of that leg up, at 1.6684… it moves back to 1.6660 - a level almost exactly 144 from the initial low created on 12 Nov.

Now look at GBPUSD daily from 2-Sep to 11-Sep - 629 pips on my chart… a big move, and I managed to catch the last third, because once it had broken beyond 377, I had confidence that it would moved toward 610. After it moved 610 up, it broke down, and moved lower, confirming that this move was exhausted, and so I was able to re-entered on the way back down. This big down leg, from 11-Sep to 28 Sep was 10 pips shy of 987 - another fib number.

Third and final example is EURUSD’s recent bounce off it’s high of this year on 11-Nov… a 228 pip move lower before retracing on 13-Nov - so close to 233, another fib number. If it breaks lower after the current retracement, how far will it go… will it go down 377 from the high? I don’t know, but that level will equate to 1.4670, an area only 10 pips below strong support from early and late October lows.

I also use these Fib numbers on the time axis, and have found some interesting results… measuring the length of a range or a trend, though one has to be careful to not match the numbers to time ranges, just because they fit.

My main trading tools are price action and support/resistance, so this filts neatly with my style. I try to get a feel for the market as to whether it is overbought or oversold… these Fib numbers are another means to confirm this. I find I can more accurately sense market moves, and when I also see the time interval aligning with a Fib number, this effectively gives me an x and y co-ordinate for these tops and bottoms.

You run an excellent service, Vahid, so keep up the good work. If you find this useful, please share it in your forex market analysis service.

Cheers,
Philip.

Dear Vahid

I read many lessons from you and they make me understand how to use bolinger band and candelsticks so well.I feel like I’m much improved.
I hope to read more articles from you.

Thank you so much!

Wow your teachings are so great! Anyways, I have found a little system that works in most market conditions where you use stochastic, bollinger, and good ol candles. I didn’t buy it either just through all my studying I discovered you could use all these indicators. What I do is look for stochastic divergence and then and only then look for a reversal signal in the trend (it rocks because 80% of the bar formations are comfirmed already by the divergence so I don’t need a confirmation bar afterwards) then all I do is enter and either take it to the middle of the bollinger bands or from one to the other. Tell me what you think about it. It’s average return is about 30 pips per day with the biggest move being 900 pips since I use a trend-following strategy if the divergence causes a trend biggest loss is 50pips.