Tag Archives: Swing High

08.05.19
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How to Use Fibonacci Extensions To Rack Up Profits

Hello and welcome to to another edition of the bulls vs the bears.  Last time we  tried  Lighting Fibonacci Retracements with  Candlesticks. Basically we combine Fibonacci retracements with candlestick analysis. This week we are going to learn how to use Fibonacci extensions to rack up rock up profits. We are going to use  Fibonacci extensions to help us ascertain when to take profits.

I guess some of you are wondering:

What Are Fibonacci Extensions?

Well Fibonacci extension are levels that extend beyond the current price. Unlike Fibonacci retracement where you are dealing with four levels(0.382, 0.618 and 0.764), you only need to sweat about two levels:1.382 and 1.618. 

Once you identify a trend with a retracement, just pull up your Fibonacci tool  and you will see the extensions pop the 1.382 and the 1.618 levels onto your charts. Those two levels then become potential price target levels. You determine the Fibonacci extension levels with three mouse clicks.  Some of you are going ” How do you that?” Well click on the most recent Swing High, and then drag your cursor on the most recent Swing High. Last but not least, drag your cursor back down and click on any of the retracement levels.

The result will be that each of the price extension levels showing both the ratios and the corresponding price levels. Pretty neat right?  To help us create The Fibonacci extensions level let’s take a look at the at the EUR/USD chart that we worked with when we used the Fibs retracements

If we remember correctly the 50.0  level held up quite nicely. as support. After surviving three tests, the bulls, who were buying  price  resumed their upward climb. They were so confident climbing that they even bypassed the previous Swing High.

Now let’s pull up the Fibonacci tool and hunt for the best place to rack up profits using the USD CHF currency pair

First off let’s see what happened after the Retracement Swing Low happened.

  • Price launches a comeback hitting the 61.8 level, which aligns nicely with the previous Swing High.
  • Unfortunately it slips back to the 38.2 level where it runs into support
  • Price then rallies and hits the resistance wall at the 100% level.
  • A few days again price mounts yet another rally and runs into, you guessed it, another resistance barrier.

So judging from the example it’s pretty obvious the 61.8%, 100%, and 161.8% levels are the spots to rack up profits.

Now we are going to look at Fibonacci extension levels in a downtrend. In a downtrend the main objective  is to take profits on short trades. Why? because the market seems to find support at these levels.  Now let’s take another gaze at the EUR/USD chart we looked earlier in the Fibs lesson.

We recall seeing  a nice looking doji forming at the 61.8 level. Price then went into reverse as sellers smelled blood and dragged price all the way down to the Swing Low.

How about about we pull up the Fib extension tool and see the best places to rack up profits assuming we traded short at the 61.8% level.

The 38.2%, 50.0%, and 61.8% extension levels would have all been good places to take profit

Now here is a summary of what happened after the price reversal at the Fib retracement level.

  • Price hits support at the 38.2 level.
  • 50.0% level holds out as support but then turns into an event zone.
  • 61.8% level aso turns into an event zone before price takes a dive to test the previous swing low.
  • 100% level looks like it’s been busy acting as a support barrier also.

From this synopsis we could have picked up profits from the 38.2%, 50.0%, or 61.8 levels.  It is also possible that other traders were  watching these support levels like a hawk since they were also anticipating  significant profits as well.

What Do We Learn From These Examples?

That price  makes a pit stop at support or resistance at the Fibonacci extension levels. But don’t be fooled into believing it happens all the time, because it doesn’t happen that way. But it happens enough for you to adjust your position and rack up profits, and more importantly manage your risk.

Unfortunately there is no way of  ascertaining  which Fibonacci extension level will put up the resistance. Another headache is choosing which  Swing Low to start from in creating the Fibonacci extension levels. One way to get around this is using the Swing Low from the previous examples. The point is there is nothing etched in stone as to which is the right way of picking the right swing points. But as they say, practice makes perfect.  So with a little practice you should b able to master picking the right swing points.

In short  you will have to use your discretion when using the Fibonacci tool.  You will have to determine how long the trend will stay on. Your decision  could either make or blow up your account.

That’s a wrap for ”How to Use Fibonacci Extensions To Rack Up Profits ”. Next week we will learn how to use Fibonacci to place a stop loss.

Til  next time take care.

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07.23.19
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Combining Fibonacci Retracement With Trend Line Analysis

Hello and welcome to another edition of the bulls vs the bears. Last week we touched on How to Map Out Support and Resistance Areas With Fibonacci Indicator. Today we are combining Fibonacci Retracement with Trend Line Analysis. But  before we go on , if you are not sure about drawing trend lines  look up my post Drawing and Trading Trend lines. Failure do so could result in irreparable damage to your health.

Now that we’ve gotten that little alert out of the way, let’s move on with today’s lesson.

Whenever the bulls or the bears  are in control you make use of Fibonacci retracement levels to get in on the trend. So all you have to do is to look for Fibonacci levels that line up with the trend. Let’s take a look at the 1 hour chart of the AUD/JPY pair.

Rising trend line on 1-hour chart of AUD/JPY

As you can see the bulls  have been running amok on the  bullish trend line.  You  see this and you say yourself”Now will be the perfect time to make my trade once the pair touch the trend line.” But then  that little voice in your head counters with a whisper saying “How about you pull up your forex toolkit and get your Fibonacci toolkit so you can get an accurate entry price?”

Fibonacci retracement levels intersecting with rising trend line. Potential support?

As you can see the Swing Low has been plotted at 82.61 and the Swing High at 83.84. See how the 50% and 61.8% Fibonacci levels have been intersected by the rising  trend line. Hmmm…..Something tells me these two levels could be possible levels of support. Let’s find out. Shall we?

Trend line and support at 61.8% Fibonacci retracement level hold

Voila! We have a level of support at the 61.8 level. Price ricochets nicely before heading for the hills. Put in  some buy orders here and you make  the grandest  entry into the price action.

After touching the trend line, price bursts through the  nearest Swing High and heads for the hills. So it does pay to have the Fibonacci tool even if you plan on cracking the trend line a second time. When you see both a diagonal and a horizontal support/horizontal level just know that other traders are eyeing these levels like a hawk. They ‘re getting ready to pounce when the opportunity presents itself.

And, just like other drawing tools, trend line analysis can be subjective. No two traders see trend lines the same. Their binoculars see differently. But one thing is certain- You will see a trend. But once you see a trend take shape, start looking for ways to go long  to give yourself a chance to laugh all the way to the bank.

That’s a wrap for ” ”. Combining Fibonacci Retracements with Trend Line Analysis.”  Next week we’ll  touch on  Lighting Fibonacci Retracements with Candlesticks.  Not to worry we’ll not be doing a vigil.. We’ll just use the Fibonacci too to find candlestick patterns.

Til next time take care

Opening Live Account

If you’re looking to open a live trading account sign up with EasyMarkets.