Fibonacci Retracement Points in Forex Trading:

Below are the reasons why Fibonacci Retracement points need to be determined in Forex trading.

(1) The main goal of traders in Forex trading is to find reliable support and resistance levels, since both of these levels can be used to provide reliable Buy Entry and Sell Entry.

Experienced traders usually use the Uptrend Downtrend Market and Retracement points as Temporary Support and Temporary Resistance respectively and provide Buy Entry and Sell Entry at those two points respectively.


(2) When trading simultaneously around the world, millions of traders use Fibonacci tools to determine the Retracement Points of the Uptrend and Downtrend Markets and provide Buy Entry and Sell Entry at that point at the same time and Uptrend and D  After the Retracement Point in the market, the price starts to rise and fall, so the Retracement Point of the Uptrend and Downtrend Market then plays an important role as a reliable support and resistance.

(3) Traders usually make Stop Loss just below Retracement Point in Uptrend Market and just above Retracement Point in Downtrend Market.

However, when traders provide Buy Entry somewhat above Retracement Point in Uptrend Market and Sell Entry somewhat below Retracement Point in Downtrend Market, traders then use Retracement Point to set Stop Loss.

Reason for Determining Fibonacci Extension Points in Forex Trading:

We know that Fibonacci Retracement is a special form of Fibonacci Extension, because, if the amount of Fibonacci Retracement is more than 100.0% Fibonacci Retracement is called Fibonacci Extension.

The Fibonacci Retracement formula or the Fibonacci Extension can be used to determine the value of the tool. The Fibonacci Retracement formula does not require any formula or tool other than Fibonacci Extension ratio to determine the value of Fibonacci Extension. The reasons why it is important to determine the value of Fibonacci Extension Level are mentioned below--

(1) Strong Support Level for Uptrend Market at General Fibonacci Extension Point and Strong for Downtrend Market Resistance levels appear.

(2) Since the amount of extension is more than the amount of retracement, many traders use Fibonacci Extension point in two ways in real case. Such as -

        (A) Fibonacci Extension Points are used as Take Profit (or, Projection) Points if a trade entry has been made before (Figure below).

        (B) Fibonacci Extension Point is used as Retracement Point for new trade entry (Figure below).

        (C) Many expert traders use Fibonacci Projection tools to determine Fibonacci Extension Levels for a variety of purposes, including Fibonacci pattern identification, including trade entry and tech profit determination, (Figure below).


Reason for Determining Fibonacci Projection Points in Forex Trading:

Below are the reasons why Fibonacci Projection Points need to be determined in Forex trading--

(1) Traders usually retracement of Uptrend and Downtrend markets Fibonacci after providing Buy Entry and Sell Entry at the level Determines the Projection Level with the Projection Tool and
Use the level for Take Profit.


(2) Since many traders around the world use Fibonacci Projection Points for Take Profit at the same time, Fibonacci Projection Points usually have a Reversal Trend.

Comment: No trader should assume that his determined Fibonacci Retracement, Extension or Projection level is correct and from that level the reversal trend will start in the market. A variety of tools and Fibonacci patterns have been developed using Fibonacci ratios to determine the exact Reversal Trend of the market which is discussed in detail in the “Part IX: Strategies” section of this book.

What do Swing Low and Swing High mean:
When the value of Low of a Candlestick is less than the value of Low of the Candlestick before and after that Candlestick, then the value of Low of that Candlestick is marked as Swing Low Point, notice the figure below-


However, when many Swing Low points are placed side by side, the Swing Low point, which is usually at the lower end, is selected for use in the Fibonacci tool.

Similarly, when the value of High of a Candlestick is higher than the value of High of the Candlestick before and after that Candlestick, then the value of High of that Candlestick is marked as Swing High Point. We notice the following figure -


However, when many Swing High Points are placed side by side, the Swing High Points are usually selected for use in the Fibonacci tool.
Tips: To determine the right level of Fibonacci Retracement, Extension or Projection Level, it is very important to identify the right Swing Low and the right Swing High point for trading. But the real truth is. That Chart contains so many Swing Low and Swing High points that identifying the right Swing Low and the right Swing High points can be a daunting task.

To solve this problem, Chart uses a variety of formulas, including "Fibonacci Price Cluster" and "Potential Reversal Zone". This is discussed in detail in the "Part IX: Strategies" section of this book.