Fibonacci Retracement Level 50% With Price Action Confirmation
The combination of price action and 50% Fibonacci retracement level is very powerful when applied to the right market conditions.
The combination of price action and 50% Fibonacci retracement level is very powerful when applied to the right market conditions. Ideally, confirm the entry via Pin Bar setup or fakey Reversal Bar on 50% Fibonacci Retracement level.
Note: Pin Bar, Fakey Bar, and Inside Bar is the author’s term for the bar formation which is considered a benchmark in Price Action trading. The pin bar is the principal reference in the price action. The explanation has been discussed in the previous article on Price Action.
1. If we find the Price Action signal on the daily chart, with the formation of the chart being retrace or correction ( uptrend and downtrend ), immediately pull the Fibonacci Retracement level lines. Check if the Price Action formation signal occurs near or right at those levels, especially at the 50% level. If true, then that’s the right time for the entry. Moreover, if accompanied by other key levels (Support or Resistance line, or Moving Average line) that coincides with the Fibonacci Retracement level, then the support factor is very strong for open positions.
In AUD / USD Daily there is a Pin Bar formation at 50% Fibonacci Retracement level:
2. Entry-level at the last closing bar in price action formation. In the above example open buy after the last bar (third bar), and stop-loss is set slightly below the 50% Fibonacci retracement level.
3. If the Fibonacci Retracement level is not correct or maybe away from Price Action formation, it means that level is not conformed with Price Action. Fibonacci Retracement does not guarantee which level is the Support or Resistance level, whereas the formed Action Price formation always indicates a change of price movement.
Thus, in this case, the Fibonacci Retracement level can not be confirmed with the Price Action formation, and if no other supporting factor is available for the Price Action formation, it is either weak or less valid to apply.
4. In the above example Fibonacci Retracement level 50% conform with Price Action (with pin bar signal ), so it can be concluded that the level of 50% is the level of Support, and that happens the price moves up after the formation Price Action formed.
Another example of AUD / JPY Daily follows:
It appears that the 50% Fibonacci Retracement confirmation occurs after it has been broken. However, the resulting Action Action formation remains valid because the pin bar signal is in the 50% level zone, so its Fibonacci Retracement level is also valid as the support level.