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In most trading platforms, there are many Fibonacci Trading tools that are
available. The most commonly used Fibonacci tools are:
Let’s take a closer look into each of these tools and how they can help the trader
to form a bias in trading.
In the chart above we have plotted the Fibonacci retracement tool to an uptrend
by plotting the tool from the bottom swing low to the left to the upper swing high
on the right. This swing measurement gives us the fib levels of the swing move.
Notice how, after making the swing high, price bounces off constantly from the
61.8% Fibonacci level.
While most textbooks and websites usually tend to show Fibonacci retracement
tool as a standalone tool for trading, it is most effective when used in combination
with other forms of technical analysis.
Conclusion
From the above article, we notice how Fibonacci tools can be used to build a
complete trading system. Despite various texts that tend to depict Fibonacci
tools as an independent indicator, using them together offers a much clearer
perspective of the markets. When combined with other price action trading
methods such as support/resistance, trend lines and so on, the Fibonacci set of
tools can offer an alternative way of trading the markets.