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The construction of Fibonacci levels in Forex
The article about the Golden Fibonacci number I have already briefly told about their role in the market and even cited as an example of a Fibonacci grid, but to create a complete strategies this information will not be enough. Today we will discuss the detailed algorithm of Fibonacci levels in Forex.
So, as I mentioned in one of the reviews, most accurate signals are obtained at the intersection points of the classical Fibonacci and fans of the rays, so close attention must be paid to these two instruments.
The "classic" layout refers, as a rule, line and Fibonacci extension, that is, the horizontal levels, which complement each other. In particular, the first of them allow to calculate the optimal depth of the price adjustment of the trading instrument and the latter helping to design the goals of the movement for the future.
The construction of Fibonacci levels always begins from left to right, i.e. in the direction of movement of the candlestick chart (and not Vice versa).
The rules of construction of price levels to Fibonacci
Line Fibo of the grid are laid out from the start point of the trend to the extreme where it ended, although in this case it would be appropriate to speak not so much about trends, but about the impulses.
Fibonacci - like look
The problem here is that in the current time on the timeframe the trend can only be one, so the point of its completion is constantly updated as long as the reversal does not become apparent. It follows that the construction of Fibonacci levels will be inaccurate.
As rebuilt, Fibonacci
If a tendency to split the pulses and to investigate the correction within each of them, the uncertainty is removed, plus an opportunity to detect the most severe levels of marking which coincided at different time intervals.
Fibonacci levels and their overlapping each other
By the way about the power of the correctional Fibo lines, as a rule, a profitable system takes into account the level of 38.2%, 50% and 61.8%, and the rest of the build is used to establish short-term stop losses and take profits, or combined with other filters, for example, patterns Price Action.
The construction of Fibonacci levels for finding future objectives of the movement
Any trader even a beginner who is very conscious of the fact that out of position is sometimes more important than input, so only one signal for the buying and selling of currency pairs for successful trading it is necessary to have guidelines of when to close the deal.
To build such forecasts have been created by Fibonacci expansion, for the markup which you need to follow a few simple steps.
The first thing (after choosing the appropriate tool in the terminal menu) the basic layout is stretched as a normal Fibo grid from the left to the right of the start point of a pulse until its end. The result will appear in the chart formation, which consists of three points.
The angulation of the three points
In the second stage it is necessary to choose this rough layout (by double-clicking the left mouse button) and move the point 3 on the high or the low of the correction (for the bearish and bullish impulse, respectively).
The formation of levels of theory Fibonacci
That's the whole construction of Fibonacci levels in the Forex market – now we have a target bracket, which you can set take profits.
I recommend a couple of reviews on the topic:
Fibonacci Fan
The Fibonacci Channel
As you can see, a null extension is based on the third point of the reference marking, the distance from 0 to 100% in points equals the interval (1-2) and all other levels are translated at the Golden Fibonacci numbers. The arguments of some traders who claim that such patterns are too complicated for interpretation, baseless, on the contrary, it is enough to connect the key points, and the rest of the work will make the computer.
The distance between Fibonacci levels while building
In contrast to the construction of Fibonacci levels that identificeret correction, when configuring the extension is allowed to experiment with the ratios, as much will depend on:
trading style of the trader;
working timeframe;
fundamental factors affecting the dynamics of the pair.
For example, the figure below presents potential targets EURUSD, calculated on the basis of standard coefficients:
Option with Fibonacci expansion
The idea of installing a take profit at 100 and 161.8 in the current environment, it seems ill-considered, since in any case, achieving such levels will take years, during which the overall situation in the Eurozone and the US may change so that all "technology" will be crossed out.
To reduce the uncertainty factor, to plot the Fibonacci levels you can add multiple additional layers above 61.8 and within the range of 61.8 – 100.
Build additional levels
Thus, we have a more accurate and meaningful benchmarks. And since we are talking about goals, not to mention the fact that the Fibonacci expansion are one of the few tools with which to assess potential movement of the pair after the breakdown of the highs and lows.
As for the algorithm of the Fibonacci Fan (sloping levels), the principle is similar to the markup Fibo grid, that is, the baseline is stretched from left to right from the extreme to the extreme:
Example of trade based on Fibonacci levels
For clarity, I put the fan floor is built of Fibo levels to see how to change the character of price movement when touching the rays. Such regularities allow us to more accurately evaluate the strength of horizontal levels and the probability of their breakdown.
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| Category: Forex | Added by: (30.10.2017)
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