How To Use Fibonacci Retracement Into Forex Trading

How To Use Fibonacci Retracement Into Forex Trading

The first thing to remember is that Fibonacci theory can provide good results if used when the forex market is in a trending condition. So the idea is to open a Buy position on the Fibonacci retracement support level when the market is in an uptrend and open a Sell position at the Fibonacci retracement resistance level when the market is in a downtrend.

How to Find a Fibonacci Retracement Level

To find a Fibonacci retracement level we must be able to determine the swing high and swing low points appropriately. When Downtrend clicks the swing high point then drag the cursor to the swing low point. For the Uptrend condition, do the opposite, which is to click the swing low point, then drag the cursor to the swing high point.
Now we see an example of how to find the Fibonacci retracement level in trending conditions on the forex market.


In this example we click the cursor at the swing low at 0.6995 on April 20 and then we drag the cursor to the point of swing high at the point 0.8264 on June 3. As we see that the Fibonacci retracement levels we will get are 0.7955 (23.6%), 0.7764 (38.2%), 0.7609 (50.0%), 0.7454 (61.8%), and 0.7263 (76.4%).

Now what will be expected after the swing high is that the AUDUSD price will bounce back past the highest price after being corrected. And we will find a support level to determine the Buy position as a price reversal point.

Now we see what happens after passing the swing high!

The price bounced back after crossing the 23.6% support level until a few weeks later the price tested the support level of 38.2% but was unable to close below this level. Then around July 14 the price bounces back until it passes the swing high point and the Buy position at the support level of 38.2% will bring huge profits if not missed by a trader.


Now we will try to use the Fibonacci retracement level on Downtrend market conditions, the following is the EURUSD chart in a 4 Hour timeframe.

As we have seen that we find the swing high at 1.4195 on January 25 and the swing low at 1.3854 a few days later on February 1. Level retracement points are 1.3933 (23.6%), 1.3983 (38.2%), 1.4023 (50.0%), 1.4064 (61.8%) and 1.4114 (76.4%).

The expectation in a market position like this is Downtrend is that the price can pass the swing low point again or continue the price decline again so that we as traders need to find the resistance level point as the right price position to open a SELL order. Now let’s look at the continuation of the trending Downtrend!

But all that needs to be remembered is that the price does not always bounce back on the Fibonacci retracement support and resistance levels and this tool helps us to find a price area that can be used to determine our trading position because the name is trending the market is a mystery.The price bounces up from the point of swing low to test the Fibonacci retracement level at 50% and again continues its decline past the swing low point. And if you have a price at the level of 38.2% and 50%, then it is sure to make a big profit.

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