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Is Fibonacci Trading Strategy Good? What is and How to trade Fibonacci in Forex and Stock Market Trading? Does Fibonacci Retracement Tool work?
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Does Fibonacci trading strategy even work? Should you trade using the Fibonacci retracement tool? I have tested many strategies on the Trading Rush channel, and almost every other day, there is a comment about testing the Fibonacci trading strategy or to give my thoughts on it. Until now, I have avoided making a video about the Fibonacci trading strategy, because the idea of Fibonacci in trading sounds really stupid. But that’s my personal preference, and as you know, on the Trading Rush channel, we keep personal preferences aside and only talk with the real world data. In this video I’ve tested the Fibonacci retracement tool 100 times to see if it works or not, but unlike other indicators we have tested on the Trading Rush channel, Fibonacci can’t be backtested. Let me explain.
You see, there are many people who believe that the fibonacci tool is really good for trading, but then there are traders who believe that fibonacci levels are just some useless lines on a chart. Now remember, almost 90 percent of retail traders lose money in trading. So instead of believing other people, let’s look at the real data and understand how fibonacci actually works.
Fibonacci was a medieval mathematician, and came up with a sequence that goes something like this. 1+1=2, 2+1=3, 3+2=5, 5+3=8, and so on. Here, each new number is sum of the 2 numbers before it.
Now, if you take any number from this sequence, and divide it with the next number, you will get a value of 0.618.
If you divide any number with every other number on this sequence, you will get the value of 0.382.
And if you divide any number with 3rd number next to it, you will get a value of 0.236. Furthermore, if you divide 1 and 2, you will get a value of 0.5.
You probably noticed that these are the same numbers you will find on a fibonacci tool. On many charting platforms, these numbers are turned into percentages. So the 0.382 becomes 38.2 percent. 0.618 becomes 61.8 percent, and so on.
These fibonacci numbers are found almost everywhere in the nature. From the shape of the galaxy to the number of petals on a flower. Since the fibonacci is found almost everywhere in the nature, many traders believe that fibonacci can also be applied in trading.
So, people started applying the fibonacci tool when the charting platforms provided.
It is widely believed, that since price doesn’t go in the straight line in one direction, when the price is in a trend, the price will retrace at the fibonacci level, hence the name fibonacci retracement tool.
So in an uptrend, if you take the fibonacci tool from the swing low to the swing high, it is said that the price has a higher probability of reversing near the fibonacci levels. Some traders like to give higher importance to the 50, 61.8 and 38.2 levels.
Now here’s a big problem, unlike other indicators who actually take real market data to calculate their values, fibonacci draws levels that have almost no relation to the actual market data. Many fibonacci fan boys will buy stock or a forex pair because the number of petals on a flower or the shape of the snail’s shell is based on the fibonacci.
For example, the V WAP tool that I have recommended many times on this channel, takes the real volume traded on a stock to calculate it’s value, fibonacci doesn’t do anything similar to that.
One might say, that fibonacci does take market data like the swing low and swing high into consideration. Well yes, but that’s actually a problem.
You see fibonacci numbers have almost no real useful value in Trading. It has great importance outside of the financial markets. The only reason why fibonacci works, is because people believe it works. If enough people believe that the 50 percent retracement level works as a reversal point, many people will enter trade near that level, which will make the price go in the desired direction.
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This chart has 2 lines, the crossing of the 2 lines is a signal of a brand-new trend. You then require to see if the odds are on your side with the breakout so you check price momentum. So how do we appreciate the pattern when day trading?
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Nevertheless, there is something you do not desire to over appearance – memory. A couple of big profit trades might be your entire year profit. The two lines consist of a sluggish line and a fast line.
The Stochastic Oscillator is an overbought/oversold indicator developed by Dr. George Lane. The stochastic is a common indication that is integrated into every charting software application including MetaStock.
These are the long term financial investments that you do not hurry Stochastic Trading into. This is where you take your time analyzing an excellent spot with resistance and assistance to make a big slide in earnings.
A good trader not only considers the heights of revenues but likewise ponders the risk included. The trader ought to be ready to acknowledge just how much they are ready to lose. The upper and lower limitation ought to be clear in the trade. The trader needs to choose how much breathing space he is prepared to provide to the trade and at the very same time not risk too much likewise.
No issue you state. Next time when you see the profits, you are going to click out and that is what you do. You remained in a long position, a red candle appears and you click out. Whoops. The marketplace continues in your instructions. You stand there with 15 pips and now the marketplace is up 60. Disappointed, you choose you are going to either let the trade play out to your Stochastic Trading profit target or let your stop get set off. You do your research. You go into the trade. Boom. Stopped out. Bruised, battered and deflated.
A breakout is most likely Stochastic Trading if the assistance and resistance lines are converging. In this case you can not assume that the price will always turn. You may choose to set orders outside the series of the assembling lines to catch a breakout when it occurs. However once again, examine your conclusions versus a minimum of one other indicator.
If the resistance and support lines assemble, breakouts are probable. In this instance, you may not assume that costs will return constantly. You might like orders outside the converging line range to obtain a breakout as it takes place. Yet again, inspect your evaluations against a minimum of 1 extra indicator.
This is an easy Forex trading technique which is logical, east to discover and is a timeless way to make cash. You can easily learn a swing trading method in a week or to and after that, your all set to attain trading success in less than an hour a day and earn yourself some great Forex profits.
In an uptrend each brand-new peak that is formed is higher than the prior ones. The Stochastic – is a really powerful trade indicator. His work and research study are first class and parallel his character as an individual.
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