Advanced Fibonacci Trading Techniques
Fibonacci Trading describes the use of Fibonacci retracements and extensions, a fantastic way to gather accurate data on crucial resistance and support lines.
Since their introduction into the world of trading, Fibonacci retracements and extensions have proven to be immensely dependable and reliable and this is why they are often deemed priceless by traders.
Laying the retracements and extensions, however, is a somewhat challenging task which is up to the discretion of the trader. There is the possibility of problems in the event of multiple high and low prices coming into play, and laying the Fibonacci analysis on top of a candlestick diagram may not yield accurate data.
Under these circumstances, traders may not feel confidence in their analysis. However, the use of Fibonacci clusters is a simple and effective solution to this problem.
By projecting the resistance and support lines, Fibonacci retracements and extensions provide invaluable data to a trader. The Fibonacci analysis can find extremely accurate resistance and support lines when it is used in the right way, but can create problems if applied incorrectly.
Practical Application of Fibonacci Trading
Utilizing Fibonacci analysis incorrectly is very possible when multiple high and low points are present on a candlestick chart. Under such circumstances, it may be difficult to ascertain which two points to settle on.
Making a decision about which points to pick is enormously important because it has a huge impact on where the Fibonacci analysis will detect resistance and support lines, and if carried out inaccurately there is the possibility of playing the market to false resistance and support lines.
A trader can use Fibonacci clusters as a solution in this situation. Clusters are very easy to employ and despite not providing data as accurate as a single retracement or extension, they are very reliable.
The premise of Fibonacci clusters is very easy to understand: a trader should simply lay multiple retracements and extensions over a single candlestick chart so that the resistance and support lines can be determined. This strategy should only be used when there are a great number of high and low prices to pick from, and when this is the case a trader should pick several prices and apply the Fibonacci analysis to them.
By this method, average points of resistance and support can be identified, and it is far superior to simply guessing two prices and utilizing only one retracement or extension.
The final result may be a bit perplexing due to there being lots of information on the candlestick chart, but a trader should be able to figure out points where several retracements or extensions line up and come to a conclusion on a point of resistance or support.
If this is the case it is very likely these clusters will behave as genuine points of resistance and support and they can be relied on by traders. When a price approaches one of these clusters it should behave as expected by either rebounding or breaking through.
This strategy works extremely well when a trader does not know where to place a retracement or extension, and on the average it also works accurately as an indication technique.
The art of Fibonacci trading is one that can be easily mastered with a few tips and specific examples. For a complete free tool set visit our site http://www.fibonaccigenius.com
Article Source: FxTradingStock.com
About the Author
Fibonacci Tradingcrucial to finding great trades. If you want to pinpoint low risk, high odds trades get accustomed to pinpointing important Fibonacci reversal or continuation zones. Before you make any more trades visit out site http://www.fibonaccigenius.com
by: Mark Deaton
Total views: 40
Word Count: 585
Date: Wed, 21 Jul 2010
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