In today forex faq, I shall be sharing with you something about the forex Fibonacci indicator.
Below is the question:
AS THE PRICE ACTION REACHES FIBO:61.8, HOW DO U KNOW FOR SURE THAT THERE IS A
REVERSAL AS ‘CANDLES’ ARE CONFUSING DURING CONSOLIDATION PHASE.
If you have read the forex trading signal that I have specially prepared for you guys every week, you will know that I emphasize a lot on the Fibonacci indicator as a tool to know whether the market is going to reverse or not.
Here is what I usually use to tell a reversal:
Whenever you see the price moves, it will usually retrace and then move back up again. If you draw a Fibonacci indicator on the most recent high and low, you will find that those retracement usually ends between the 0.382 and 0.618 levels.
For those prices which retrace more than 61.8%, it is usually a reversal. In fact, when it comes to the forex Fibonacci indicator, there is no way you can know for sure that the price is going to be a reversal after it reaches the Fibonacci 61.8 level. However what I am saying here is there is a higher chance of a reversal if the price retraces more than the 61.8% level.
Besides using the Fibonacci indicator, what we can do to increase our chance of knowing whether the price is going to reverse or not is to look for major support or resistance levels from the candlesticks.
If the price breaks retraces more than 61.8% and then breaks below a major support, it is most probably a reversal in action.
However this is again not a 100% sure method as there is nothing that is for sure in trading. Everything in trading is just about probability, sometime you can have the best alignment and everything looks set to be with you but you still get stop out.
This is something that you have to be able to take if you are serious to become a professional trader.