Fibonacci levels support and resistance ~ forex trading hours utc
The Fibonacci sequence describes key ratios from growth in plants, human anatomy, and so on. The forex application is to price movements, which appears to realize Fibonacci ratios. This is particularly obvious on larger time frames such as weekly, daily, and 4-hour time charts. A large move from a low to a high is often followed by an attempt of the price to move back or “retrace” the original move. These areas of rest are Fibonacci points. For example, let’s look at a chart showing a price move on the euro–U.S. dollar (EURUSD) 4H chart chart (see picture1).
We can see that the EURUSD made a low at 1.3525 and then proceeded to forma high at 1.3637. Once this move was completed, the trader can use a Fibonacci (Fib) graphic tool, which is available on all platforms to draw a Fib line. The Fibonacci retracement are:
23.6% the shallowest of the retracements;
38.2% this is the first line of defense of the current trend.;
50% the neutral point of any retracement.;
61.8% retracing to this typically signals a breakdown in the trend;
100% matching the move;
other potential lines are: 138.2% , 161.8%, 200%.
Since the price started from the low, the Fib tool assigns the 100 percent level to this origin point. The best way to interpret this is to think of the price going all the way back home to where it started. It would achieve a 100 percent retracement. Once the low and the high are connected, the Fib graphic tool draws the lines and projects it out. Notice that these Fib lines are extended into the future. The trader doesn’t know if the price will get there! The trader makes the assumption that if the price is able to get to a Fib level, it will experience strong support or resistance. Also, if the price is able to probe a future Fib level but fails to go through it, the trader can make a reliable assumption that there is key support at that level.The price moved from the low of point A to the high of point B and then proceeded to retrace or fall back.
The Fibonacci levels are maps of potential support or resistance. They are areas where great care should be taken by the trader. Rest assured that any professional trader knows where the key Fib levels are. Perhaps because these levels are projected and therefore known in advance, they generate a self-fulfilling process and increase in importance. |
The price moved from the low of point A to the high of point B and then proceeded to retrace or fall back |
Fibonacci Quiz
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