When we combine the Fibonacci retracement with a Japanese candlestick we will try to find a signal reversal from the bullish trend or a bearish trend. And if you know this condition then you can easily predict where the next market is going. To find out how this method is used, here is an example of using it in the movement of the EURUSD currency pair within a 60 minute period.
As seen that the movement of the currency pair above is in the downtrend direction and will momentarily end due to weekend. You also see a trading opportunity in it and this means the right time for you to use the Fibonacci retracement tool to determine when the right time to open an order.
As you can see we determine the Swing High 1.3364 point on March 3 and the Low Low point 1.2523 on March 6.
Because the weekend has passed, it’s time for you to look back at the movement of the EURUSD currency pair.
Because the 50.0% Fibonacci retracement level has been penetrated, this indicates that buyers have got a high price for the currency pair. And the next step is to wait whether the 61.8% level will also be broken because the last signal is a bullish signal (bullish green candle) which allows it to continue its bullish movement.
Is this the right time to open a Sell Order position? keep in mind that we cannot be too sure of this, we must apply risk management to anticipate the mistakes we will make. But the opportunity to open a Sell Order position is very large based on the signal reversal of the above direction.Now we see that a long foot Doji has formed at the level of 61.8% and this indicates that the movement of the EURUSD currency pair has begun to saturate or weaken. Will the 61.8% level resistance survive? this can happen and we need to know that there are also many traders who see this condition.
If you open a Sell Order position at the 61.8% level then you will get a very large profit. Because after forming a candlestick doji the price moves down with the number of red candlesticks showing the buyers have lost their strength.
As seen, buyers are tired of continuing their trade and giving sellers the opportunity to take over until they move back to the Swing Low point of 500Pips.
This method is very useful for us traders to determine a position in a forex trade or stock when this method gets the signal.
When you find a Fibonacci candlestick has been formed then the step you need to do is enter the market and open a position of Buy Order or Sell Order according to the next price movement because you already have a confirmation signal.