View the price movements in waves. Price is always moving in waves. For using Fibonacci tools correctly, it is very important to be able to spot where the waves starts and where it finish.
All Fibonacci tools are based on price action.
Always pull the tool from left to right.
Never enter a trade based only on Fibonacci!
When looking for support:
- When looking for a support, pull the tool from swing low to a swing high.
When looking for resistance:
- When looking for a resistance, pull from swing high to a swing low.
.618 and .66 is the most important one -> we call this WP (Wizards pocket) but the standard name for this is golden ratio.
These numbers are simply % of retracement.
e.g price hits 0.5 retracement – price retraced by 50% compared to initial move.
In strong trend, 382. is the first S/R level to look for. After losing this retracement to WP is likely.
Losing WP is an early indication of losing the whole trend.
In strong bearmarket, only once the .236 is reclaimed you can tell possible buttom is putted in.