Fibonacci Retracement

Fibonacci Retracement Introduction

In my opinion, I believe that Fibonacci Retracement is the most incorrectly used method on the market.  Maybe I should rephrase that.  I believe that most Fibonacci methods are over-simplified.  They are not used to its full potential.  I have read lots of books on the subject, and only three people were able to “wow” me and still today I find these guys to be true innovators and pioneers of the Fibonacci Retracement method.  After acquiring my knowledge, I have found ways to enhance the reliability of Fibonacci Retracement.  I hope I can do the same for others as these great teachers have done for me.

 

Fibonacci Retracement is the foundation of my trading approach.  It is no secret.  After training my eyes and my brain to understand what the market was telling me, trading has become less stressful and more empowering.   I can finally say that I have an edge in the markets since applying Fibonacci Retracement.

 

The Fibonacci sequence and the golden ratio are manifested throughout nature.  It is even used in music, art and architecture.  The general consensus is our brains are wired to the vibrations of these numbers as well.  And since a price chart is just a mathematical representation of the change in fear and greed, which is directly related, to change in price, the change in price must be a direct reflection of our human emotions.  So, if our brains are tuned into the vibrations of this mathematical phenomenon, the change in price can be measured with the same vibrations.  These vibrations are better known as the golden ratio.  Isn’t that amazing?

 

Fibonacci Retracement Rules

In the first lecture of the Fibonacci Retracement series (Fibonacci Retracement Introduction) we discuss elementary concepts.  First we touch upon a little history lesson and common occurrences in nature.  Afterwards, we derive the golden ratio from the sequence. 

 

In the second lecture of the Fibonacci Retracement series(Fibonacci Retracement Rules)  we discuss the derivation of the other popular Fibonacci levels.  These levels are the 38.2% and the 50% retracement levels.

 

 

 

Fibonacci Retracement Explained

In the last part of the Fibonacci Retracement series (Fibonacci Retracement Explained) we go through a couple charts for practice.  I quickly discuss a trade I made recently in gold.  Afterwards, we just look at a few more examples on how the retracements tie into the price wave model.  Hopefully after this exercise, you will be able to see how everything fits together.

This series is not intended to be an advanced strategy.  This is common knowledge amongst all traders.  However, it is important to understand these basic concepts.  Once we get into the advanced concepts of Fibonacci Retracement, your head might spin.  So we must crawl before we walk and learn the basics.

Enjoy!
Gregory King

 

 

Gregory King a foreign currency trader, Fund Manager, and math aficionado. “My cardinal tenet will always be "Keep Trading Simple." I sincerely believe, that in the long run, the market can be exploitable in a few situations if one has the forbearance to stick to the simple fundamentals. Overtrading is the main detriment for the demise of majority of trading careers.
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