April 22, 2018

Fibonacci Trading for Daytraders

Fibonacci Trading for Daytraders

The Fibonacci retracement tools are one of the most popular instruments used by the day traders. Professional daytraders use these tools to identify the potential buying and selling zone. The most popular retracement level among the professional traders is 38.2%, 50% and 61.8%.Day trader’s look for valid trade setup and price action confirmation in the Fibonacci retracement level to take the trade.

Chart Example:  Fibonacci  Retracements

Figure: Fibonacci trading tutorial for day traders

Professional day traders trade the important Fibonacci level in the longer time frame. In the above figure, the most recent swing low and swing high is used to identify the retracement level of the pair. It’s imperative that a higher low (point a) should be present before the swing low and a lower high (point b) after the recent swing high. Daytraders look for the confluence of the signal in the important Fibonacci level to take their trade.

In the above figure price action confirmation candlestick printed on the 61.8% Fibonacci level and the support zone which triggers the long entry.  Daytraders usually put their stop loss just below the 61.8% Fibonacci level for an uptrend. In case the trade is taken with the confluence of signal then stop loss is adjusted just below the support level. Take profit is generally set above the swing high and next nearest key resistance level.

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